Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.5063-1.5133. The pair closed at 1.5101, shedding 0.18% on a daily basis. It has been the fifth drop in the past nine trading days. The daily low was a higher-low test of the low from Wednesday.

At 8:29 GMT today GBP/USD was losing 0.10% for the day to trade at 1.5088. The pair touched a daily low at 1.5075 at 7:30 GMT, overshooting the range support level (S3).

Today GBP/USD trading may be influenced by one key macroeconomic report listed below.

Fundamentals

United Kingdom

Gross Domestic Product – second estimate

The second estimate of United Kingdoms GDP probably confirmed the preliminary estimate, released on October 27th, that economy expanded at a rate of 2.3% during the third quarter of 2015 compared to the same period a year ago. It has been the slowest GDP growth rate since Q3 2013, when economy expanded 1.9%. UK GDP grew at an annualized rate of 2.4% in the second quarter, down from a second estimate, pointing to a 2.6% growth.

According to the preliminary data, the output for electricity, gas, steam and air marked the largest slump in Q3 (-2.2%), followed by manufacturing sector (-0.7%), agriculture (-0.1%) and construction (-0.1%). On the other hand, industries such as mining and quarrying registered the largest expansion in the third quarter (+11.4%), followed by water supply and sewerage (+6.9%), transport, storage and communication (+4.6%), distribution, hotels and restaurants (+4.5%) and business services and finance (+3.1%), according to provisional data by the Office for National Statistics (ONS).

On a quarterly basis, the second estimate of UK GDP probably also matched the preliminary estimate of a 0.5% growth during Q3, following a 0.7% expansion during the second quarter. If so, this would be the slowest quarterly growth since Q1 2015, when UK GDP rose 0.4%.

In case annualized GDP rose at a slower-than-anticipated revised rate in the third quarter, this would have a strong bearish effect on the sterling, as it would dampen rate hike prospects. The Office for National Statistics is expected to release the second GDP estimate at 9:30 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.631% on November 26th, after which it closed at 0.604% to add 3.2 basis points (0.032 percentage point) compared to November 25th. It has been the first drop in the past three trading days.

The yield on US 2-year government bonds climbed as high as 0.938% on November 26th, after which it closed at 0.934% to remain unchanged compared to November 25th. It followed eight consecutive trading days of increase.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, expanded to 0.330% on November 26th from 0.298% on November 25th. The November 26th yield spread has been the largest one in more than seven months.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.894% on November 26th, after which it slid to 1.842% at the close to lose 5.2 basis points (0.052 percentage point) compared to November 25th. It has been the seventh drop in the past nine trading days.

The yield on US 10-year government bonds climbed as high as 2.225% on November 26th, after which it slipped to 2.224% at the close to lose 0.001 percentage point compared to November 25th. It has been the fourth consecutive trading day of decrease.

The spread between 10-year US and 10-year UK bond yields widened to 0.382% on November 26th from 0.340% on November 25th. The November 26th yield difference has been the largest one since November 20th, when the spread was 0.393%.

Daily and Weekly Pivot Levels

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

R1 – 1.5107
R2 – 1.5114
R3 (range resistance) – 1.5120
R4 (range breakout) – 1.5140

S1 – 1.5095
S2 – 1.5088
S3 (range support) – 1.5081
S4 (range breakout) – 1.5063

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

Central Pivot Point – 1.5227
R1 – 1.5302
R2 – 1.5411
R3 – 1.5486

S1 – 1.5118
S2 – 1.5043
S3 – 1.4934