Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.4786-1.4914. The pair closed at 1.4821, shedding 0.47% on a daily basis, while extending the loss from Monday. The daily rate of decrease has been the steepest one since December 17th, when the pair fell 0.69%. Additionally, the daily low has been the lowest level since April 15th 2015, when a low of 1.4699 was registered.

At 7:23 GMT today GBP/USD was down 0.03% for the day to trade at 1.4817. The pair touched a daily low at 1.4812 at 7:00 GMT, undershooting the daily S1 level. Support may be received at the psychological 1.4800 level at first and then – in the area around the low from December 29th (1.4786). Resistance may be encountered at the hourly 21-period EMA (1.4830) and after that – at the hourly 100-period EMA (1.4870).

On Wednesday GBP/USD trading may be influenced by one macroeconomic report as listed below.

Fundamentals

United States

Pending Home Sales

The index of pending home sales in the United States probably rose for a second month in a row in November, going up at a monthly rate of 0.5%, according to the median estimate by experts. In October pending home sales rose 0.2%.

In annual terms, the index of pending home sales advanced 3.9% in October, which has been a 14th consecutive month of increase.

When a sales contract is accepted for a property, it is recorded as a pending home sale. As an indicator the index provides information on the number of future home sales, which are in the pipeline. It gathers data from real estate agents and brokers at the point of a sale and is currently the most accurate indicator regarding the US housing sector. It samples over 20% of the market. In addition, over 80% of pending house sales are converted to actual home sales within 2 or 3 months. Therefore, this index has a predictive value about actual home sales.

In case pending home sales increased at a faster pace than anticipated, this would have a moderate bullish effect on the US dollar. The National Association of Realtor’s (NAR) will report on the official index performance at 15:00 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went as high as 0.649% on December 29th, after which it closed at 0.641% to add 1.7 basis points (0.017 percentage point) compared to December 24th. It has been the 9th gain in the past 20 trading days.

The yield on US 2-year government bonds climbed as high as 1.103% on December 29th, or the highest level since April 2010, after which it closed at 1.095 to add 3.6 basis points (0.036 percentage point) compared to December 28th. It has been the 22nd gain in the past 31 trading days and also a fifth consecutive one.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.454% on December 29th from 0.382% on December 24th. The December 29th yield spread has been the largest one in at least eight months.

Meanwhile, the yield on UK 10-year government bonds soared as high as 1.919% on December 29th, after which it closed at 1.912% to lose 1.1 basis points (0.011 percentage point) compared to December 24th. It has been the 12th drop in the past 20 trading days and also a second consecutive one.

The yield on US 10-year government bonds climbed as high as 2.319% on December 29th, or the highest level since December 16th (2.332%), after which it slipped to 2.300% at the close to add 6.8 basis points (0.068 percentage point) compared to December 28th. It has been the 12th gain in the past 31 trading days.

The spread between 10-year US and 10-year UK bond yields widened to 0.388% on December 29th from 0.322% on December 24th. The December 29th yield difference has been the largest one since December 14th, when the spread was 0.404%.

Daily and Weekly Pivot Levels

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

R1 – 1.4833
R2 – 1.4844
R3 (range resistance) – 1.4856
R4 (range breakout) – 1.4891

S1 – 1.4809
S2 – 1.4798
S3 (range support) – 1.4786
S4 (range breakout) – 1.4751

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

Central Pivot Point – 1.4894
R1 – 1.4987
R2 – 1.5040
R3 – 1.5133

S1 – 1.4841
S2 – 1.4748
S3 – 1.4695