Forex Market: GBP/USD daily trading outlook

Yesterday’s trade saw GBP/USD within the range of 1.4191-1.4322. The pair closed at 1.4263, edging up 0.26% on a daily basis. It has been the 30th gain in the past 66 trading days. GBP/USD has fallen 0.76% so far during the current month, following a 3.20% surge in March.

At 6:32 GMT today GBP/USD was edging down 0.15% for the day to trade at 1.4242. The pair touched a daily low at 1.4240 at 5:23 GMT, undershooting the daily S2 level, and a daily high at 1.4279 during the early phase of the Asian trading session.

On Tuesday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.

Fundamentals

United Kingdom

Services PMI by Markit/CIPS

Activity in United Kingdom’s sector of services probably increased at a faster rate in March compared to a month ago, with the corresponding PMI coming in at 54.0, up from 52.7 in February. The latter has been the lowest PMI reading since March 2013, when a level of 52.4 was reported. If market expectations were met, March would be the 39th consecutive month, when the gauge inhabited the area above 50.0. The index is based on a survey, encompassing managers of companies, that operate in sectors such as transportation, communications, IT, financial intermediation, tourism. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify predominant optimism (expansion in general activity). A larger-than-projected improvement in the index would have a moderate bullish effect on the pound. The Chartered Institute of Purchasing and Supply (CIPS) is to release the official reading at 8:30 GMT.

United States

Balance of Trade

The deficit on US balance of trade probably widened to USD 46.20 billion in February, according to market expectations. If so, it would be the largest monthly trade deficit since August 2015, when a revised up gap of USD 48.00 billion was reported. In January the trade gap was reported at USD 45.68 billion, as exports dropped at the steepest rate in six months, while imports returned to contraction.

Total exports decreased at a monthly rate of 2.1% in January to reach USD 176.46 billion, or a level unseen in at least 5.5 years. Exports of goods fell USD 4.0 billion to reach USD 116.9 billion in January, while exports of services went up USD 0.2 billion to USD 59.6 billion during the same month.

Total imports, at the same time, shrank at a monthly rate of 1.3% to reach USD 222.13 billion in January. Imports of goods were USD 2.9 billion lower to reach USD 180.6 billion, while imports of services rose less than USD 0.1 billion to USD 41.5 billion.

In case the trade deficit widened more than anticipated, this would have a strong bearish effect on the US dollar, because of negative implications regarding economic growth. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.

Services PMI by Markit – final reading

The final Services Purchasing Managers Index probably confirmed the preliminary value for March at 51.0, reported on March 24th. In February the final seasonally adjusted index stood at 49.7, inching down from a preliminary reading of 49.8. It has been the lowest reading since October 2013, when the gauge stood at 49.3. The PMI is based on data collected from a representative panel of more than 400 private sector companies, which encompasses industries such as transport and communication, financial intermediaries, business and personal services, computing & IT and hotels and restaurants. Values above the key level of 50.0 indicate optimism (expanding activity). In case a larger-than-projected improvement in services sector activity was reported, this would have a moderate bullish effect on the US dollar. The final data by Markit Economics is due out at 13:45 GMT.

Non-Manufacturing PMI by the ISM

Activity in United States’ sector of services probably increased at a faster pace in March, with the corresponding non-manufacturing PMI coming in at a reading of 54.0, according to the median forecast by experts, up from a level of 53.4 in February. The latter has been the lowest PMI reading since February 2014, when a level of 51.6 was reported. If expectations were met, March would be the 75th consecutive month, when the gauge stood in the area above 50.0. The PMI is a compound index, based on the values of four equally-weighted components, which comprise it. These sub-indexes reflect seasonally adjusted new orders, seasonally adjusted employment, seasonally adjusted business activity and supplier deliveries.

The New Orders Index stood at 55.5 in February, down from a reading of 56.5 in the prior month. The Employment Index tumbled to 49.7 in February from 52.1 in January, while marking the first contraction in the past 24 months, according to data by the Institute for Supply Management (ISM). The Prices Index fell to 45.5 in February from 46.4 in January, which indicated prices declined in February for a fourth time in the past six months. The Non-Manufacturing Business Activity Index advanced to 57.8 in February from 53.9 in January, indicating growth for a 79th straight month.

Among the 17 services industries, 14 reported growth and 3 reported contraction in activity in February.

In case the index accelerated at a steeper rate than anticipated, this would have a strong bullish effect on the US dollar. The Institute for Supply Management (ISM) is to release the official PMI reading at 14:00 GMT.

Daily and Weekly Pivot Levels

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

R1 – 1.4275
R2 – 1.4287
R3 (range resistance) – 1.4299
R4 (range breakout) – 1.4335

S1 – 1.4251
S2 – 1.4239
S3 (range support) – 1.4227
S4 (range breakout) – 1.4191

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

Central Pivot Point – 1.4268
R1 – 1.4415
R2 – 1.4607
R3 – 1.4754

S1 – 1.4076
S2 – 1.3929
S3 – 1.3737