Forex Market: GBP/USD daily trading outlook

Friday’s trade saw GBP/USD within the range of 1.5123-1.5240. The pair closed at 1.5217, going up 0.38% on a daily basis, while marking its second gain in the past five trading days. The daily high has been the highest level since November 20th, when a high of 1.5312 was registered. In weekly terms, GBP/USD added 0.69% last week, while marking its second consecutive week of advance. The pair has appreciated 0.83% so far during the current month.

At 9:06 GMT today GBP/USD was losing 0.40% for the day to trade at 1.5156. The pair touched a daily low at 1.5145 at 8:50 GMT, overshooting the lower range breakout level (S4).

No relevant macroeconomic reports and other events, which may have an impact on GBP/USD trading, are scheduled for release on Monday.

Correlation with other Majors

Taking into account the week ended on December 13th and the daily closing levels of the major currency pairs, we come to the following conclusions in regard to the strength of relationship:

GBP/USD to NZD/USD (0.8454, or very strong)
GBP/USD to EUR/USD (0.8351, or very strong)
GBP/USD to USD/CAD (0.6880, or strong)
GBP/USD to AUD/USD (-0.2342, or weak)
GBP/USD to USD/CHF (-0.8189, or very strong)
GBP/USD to USD/JPY (-0.9426, or very strong)

1. During the examined period GBP/USD moved strongly in one and the same direction with USD/CAD.

2. GBP/USD moved almost equally in one and the same direction with EUR/USD and NZD/USD during the past week, while moving almost equally in the opposite direction compared to USD/CHF and USD/JPY.

3. The correlation between GBP/USD and AUD/USD was insignificant during the period in question.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.621% on December 11th, after which it closed at 0.582% to lose 3.2 basis points (0.032 percentage point) compared to December 10th. It has been the second consecutive trading day of decline.

The yield on US 2-year government bonds climbed as high as 0.959% on December 11th, or the highest level since December 7th (0.967%), after which it closed at 0.879% to lose 6.8 basis points (0.068 percentage point) compared to December 10th. It has been the 6th drop in the past 20 trading days.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.297% on December 11th from 0.333% on December 10th. The December 11th yield spread has been the lowest one since December 4th, when the difference was 0.292%.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.877% on December 11th, after which it closed at 1.814% to lose 5.6 basis points (0.056 percentage point) compared to December 10th. It has been the fourth drop in the past five trading days and also a second consecutive one.

The yield on US 10-year government bonds climbed as high as 2.239% on December 11th, or matching the high from the preceding trading day, after which it slipped to 2.132% at the close to lose 10.2 basis points (0.102 percentage point) compared to December 10th. It has been the 14th drop in the past 20 trading days.

The spread between 10-year US and 10-year UK bond yields narrowed to 0.318% on December 11th from 0.364% on December 10th. The December 11th yield difference has been the lowest one since November 17th, when the spread was 0.287%.

Daily and Weekly Pivot Levels

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

R1 – 1.5228
R2 – 1.5238
R3 (range resistance) – 1.5250
R4 (range breakout) – 1.5281

S1 – 1.5206
S2 – 1.5196
S3 (range support) – 1.5185
S4 (range breakout) – 1.5153

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

Central Pivot Point – 1.5137
R1 – 1.5320
R2 – 1.5423
R3 – 1.5606

S1 – 1.5034
S2 – 1.4851
S3 – 1.4748