Forex Market: EUR/GBP daily trading forecast

Friday’s trade saw EUR/GBP within the range of 0.7092-0.7159. The pair closed at 0.7100, down 0.57% on a daily basis and extending losses from Thursday. The daily rate of increase has also been the steepest one since July 29th, when the cross slumped 0.62%.

At 14:26 GMT today EUR/GBP was down 0.15% for the day to trade at 0.7096. The pair tested the lower range breakout level (S4), as it touched a daily low at 0.7064 at 7:05 GMT. It has been the lowest level since August 11th, when a daily low of 0.7037 was registered.

Correlation with Major Pairs

Taking into account the week ended on August 16th and the daily closing levels of the currency pairs involved, we come to the following conclusions in regard to the strength of relationship:

EUR/GBP to EUR/USD (0.9636, or very strong)
EUR/GBP to GBP/USD (0.4172, or moderate)
EUR/GBP to NZD/USD (0.1243, or weak)
EUR/GBP to AUD/USD (-0.0989, or very weak)
EUR/GBP to USD/CAD (-0.2559, or weak)
EUR/GBP to USD/JPY (-0.5930, or strong)
EUR/GBP to USD/CHF (-0.7327, or strong)

1. During the examined period EUR/GBP moved almost equally in one and the same direction with EUR/USD.

2. EUR/GBP moved strongly in the opposite direction compared to USD/JPY and USD/CHF during the past week.

3. The relationship between EUR/GBP and NZD/USD, EUR/GBP and USD/CAD was insignificant.

4. EUR/GBP moved almost independently compared to AUD/USD during the period in question.

Bond Yield Spread

The yield on German 2-year government bonds went as high as -0.262% on August 14th, or the highest level since August 10th (-0.254%), after which it slid to -0.267% at the close to remain unchanged on a daily basis.

The yield on UK 2-year government bonds climbed as high as 0.604% on August 14th, after which it fell to 0.578% at the close to add 1.9 basis points (0.019 percentage point) for the day, while marking a second consecutive trading day of gains.

The spread between 2-year UK and 2-year German bond yields, which reflects the flow of funds in a short term, widened to 0.845% on August 14th from 0.826% during the prior day. The August 14th yield spread has been the most notable one since August 11th, when the difference was 0.850%.

Meanwhile, the yield on German 10-year government bonds soared as high as 0.663% on August 14th, or the highest level since August 11th (0.679%), after which it slid to 0.657% at the close to appreciate 2.4 basis points (0.024 percentage point) compared to August 13th, while marking a second straight day of gains.

The yield on UK 10-year government bonds climbed as high as 1.906% on August 14th, or the highest level since August 10th (1.931%), after which it slipped to 1.879% at the close to add 4.4 basis points (0.044 percentage point) on a daily basis, while marking a second consecutive day of gains.

The spread between 10-year UK and 10-year German bond yields widened to 1.222% on August 14th from 1.202% during the prior day. The August 14th yield difference has been the largest one since August 10th, when the spread was 1.224%.

Daily and Weekly Pivot Levels

By employing the Camarilla calculation method, the daily pivot levels for EUR/GBP are presented as follows:

R1 – 0.7106
R2 – 0.7112
R3 (range resistance – green on the 30-minute chart) – 0.7118
R4 (range breakout – red on the 30-minute chart) – 0.7137

S1 – 0.7094
S2 – 0.7088
S3 (range support – green on the 30-minute chart) – 0.7082
S4 (range breakout – red on the 30-minute chart) – 0.7063

By using the traditional method of calculation, the weekly pivot levels for EUR/GBP are presented as follows:

Central Pivot Point – 0.7103
R1 – 0.7168
R2 – 0.7237
R3 – 0.7302

S1 – 0.7034
S2 – 0.6969
S3 – 0.6900