Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.5833 – 1.5704 to settle 0.6% lower at 1.5731, falling for a second day.

At 07:08 GMT today GBP/USD was up 0.41% to trade at 1.5794. The cross held in a daily range of 1.5722 – 1.5803 and is down 0.6% for the week so far.

Fundamentals

United Kingdom

Mortgage approvals by BBA-backed banks (British Bankers’ Association) in the United Kingdom probably rose for a fifth straight month to 43 100 in May, according to analysts projections, up from 42 100 in April.

The BBA features the major banks in the country, which account for almost 60% of overall mortgage lending. The number of mortgage loans is considered as a leading indicator in regard to UK housing market conditions. As growth in mortgage lending signifies a healthy housing sector, which also contributes to overall economic activity, in case the number of loans rose more than projected, this would boost demand for the sterling. The BBA is to publish the official figure at 08:30 GMT.

United States

The Mortgage Bankers Association will release its mortgage applications data for the week ended June 19th at 11:00 GMT, projected to register a decrease of 17.2%. The MBA Mortgage Applications index measures the change in the number of new applications for mortgages backed by the Association during the reported week. It includes both refinancing and home purchases. A worse-than-expected reading should be considered as negative for the US dollar, and vice versa.

The index declined a seasonally-adjusted 5.5% in the week ended June 12th compared to a week earlier, and 6% on an unadjusted basis. The index of refinancing applications decreased 7% from the previous week, while the gauge of loan requests for home purchases slid 4%.

Economic growth

The final estimate of the US Gross Domestic Product will probably point to an annualized rate of economic contraction of 0.2% during the first quarter of 2015. The initial GDP estimate, released on April 29th, showed growth of 0.2%, which was then revised down to a contraction of 0.7% with the second estimate on May 29th. This was the first downturn in a year.

The contraction mainly reflected a deceleration in personal consumption expenditures and a drop in exports and nonresidential fixed investment, which were partially offset by a deceleration in imports and increased federal government consumption expenditures and private inventory investment.

The report on GDP is of utmost importance for market players as they look for higher rates of growth as a sign that interest rates will follow the same direction. Higher interest rates will attract more investors, which will increase demand for the US dollar. If an economy is experiencing a robust rate of growth, the benefits will eventually affect the end consumer, because of the increased likelihood of spending. Furthermore, through increased consumer expenditures the economy has the potential to expand even more. In case the final GDP beats expectations, this would certainly heighten the appeal of the US dollar, and vice versa. The official data are due out at 12:30 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5756. In case it penetrates the first resistance level at 1.5808, it will encounter next resistance at 1.5885. If breached, upside movement may attempt to advance to 1.5937.

If the cross drops below its S1 level at 1.5679, it will next see support at 1.5627. If the second key support zone is breached, downward movement may extend to 1.5550.

In weekly terms, the central pivot point is at 1.5766. The three key resistance levels are as follows: R1 – 1.6048, R2 – 1.6211, R3 – 1.6493. The three key support levels are: S1 – 1.5603, S2 – 1.5321, S3 – 1.5158.