Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3171-1.3368. The pair closed at 1.3356, surging 1.34% compared to Mondays close. It has been the 142nd gain in the past 307 trading days and also the steepest one since July 14th, when the pair added 1.48%. The daily high has been the highest level since July 15th, when a high of 1.3483 was registered. The major pair has advanced 0.93% so far during the current month, after losing 0.59% of its value in July.
At 6:57 GMT today GBP/USD was edging down 0.37% on the day to trade at 1.3307. The pair touched a daily high at 1.3359 during the early phase of the Asian trading session, undershooting the daily R1 level, and a daily low at 1.3294 during late Asian trade.
On Wednesday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United Kingdom
Services PMI by Markit/CIPS – final reading
Activity in United Kingdom’s sector of services probably shrank for the first time in the past 43 months in July, with the corresponding PMI coming in at a final 47.4, according to market expectations, which would match the preliminary PMI reading reported on July 22nd. If expectations were met, this would be the lowest level for this indicator since March 2009, when the PMI stood at 45.5.
In June the index was reported at 52.3. During the month, the gauges of output and new orders fell at the fastest rates in more than 7 years, while the gauge of employment in services was slightly down for the first time since December 2012. At the same time, respondents optimism in regard to the next 12 months was at the lowest level in 7.5 years.
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 below the key level of 50.0 signify predominant pessimism (contraction in general activity). In case the PMI fell in line with the median forecast, or even at a faster rate in July, this would have a moderate-to-strong bearish effect on the Sterling. The Chartered Institute of Purchasing and Supply (CIPS) is expected to release the official reading at 8:30 GMT.
United States
Change in employment by the ADP
Employers in the US non-farm private sector probably added 170 000 new jobs during July, according to the median estimate by experts, following 172 000 new positions added in June. If expectations were met, this would be the lowest growth in non-farm private sector employment since April, when a revised up 166 000 jobs were added.
Employment in the goods-producing sector dropped by 36 000, while employment in services increased by 208 000 in June. Employment in trade, transportation and utilities grew by 55 000 during the month, in professional and business services – by 51 000 and in financial activities – by 2 000. On the other hand, employment in US manufacturing fell by 21 000, while the sector of construction lost 5 000 job positions.
The employment report by Automated Data Processing Inc. (ADP) is based on data that encompasses 400 000 – 500 000 companies employing over 24 million people, working in the 19 major sectors of the economy. The ADP employment change indicator is calculated in accordance with the same methodology, which the Bureau of Labor Statistics (BLS) uses. Published two days ahead of the governments employment statistics, this report is used by traders as a reliable predictor of the official non-farm payrolls data. Creation of jobs has a direct link to consumer spending, while the latter is a major driving force behind the US economic growth. In case new jobs growth fell short of expectations in July, this would have a moderate-to-strong bearish effect on the US dollar. The official figure is scheduled to be released at 12:15 GMT.
Services PMI by Markit – final reading
The final Services Purchasing Managers Index probably rose to 51.0 in July, according to market expectations, up from a preliminary reading of 50.9, which was reported on July 26th. If so, this would be the lowest PMI reading since February, when a final 49.7 was reported. In June the index came in at a final 51.4, up from a preliminary reading of 51.3. 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 services sector activity rose at a faster rate than anticipated in July, this would have a moderate bullish effect on the US dollar. The final data by Markit Economics is due out at 13:45 GMT.
ISM Non-Manufacturing PMI
Activity in United States’ sector of services probably increased at a slower pace in July from a month ago, with the corresponding non-manufacturing PMI coming in at a reading of 56.0, according to the median forecast by experts, down from a level of 56.5 in June. The latter has been the highest PMI reading since October 2015, when the gauge was reported at 59.1. If expectations were met, July would be the 79th consecutive month, when the PMI stood in the area above 50.0.
The New Orders Index stood at 59.9 in June, up from a reading of 54.2 in the prior month. The Employment Index moved back above the key 50.0 level to reach 52.7 in June, after being at 49.7 in May, according to data by the Institute for Supply Management (ISM). The Prices Index slipped to 55.5 in June from 55.6 in May, which indicated prices went up for a third consecutive month. The Non-Manufacturing Business Activity Index advanced to 59.5 in June from a reading of 55.1 in May, indicating growth for an 83rd straight month.
In case the Non-Manufacturing PMI slowed down more than anticipated in July, this would have a strong bearish effect on the US Dollar. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.230% on August 2nd, or the highest level since June 30th (0.249%), after which it closed at 0.181% to add 2.0 basis points (0.02 percentage point) compared to August 1st.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.706% on August 2nd, or the highest level since July 29th (0.750%), after which it fell to 0.685% at the close to lose 0.002 percentage point compared to August 1st.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.504% on August 2nd from 0.526% on August 1st. The August 2nd yield spread has been the lowest one since July 12th, when the difference was 0.494%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the daily levels of importance for GBP/USD are presented as follows:
R1 – 1.3374
R2 – 1.3392
R3 (Range Resistance – Sell) – 1.3410
R4 (Long Breakout) – 1.3464
R5 (Breakout Target 1) – 1.3528
R6 (Breakout Target 2) – 1.3556
S1 – 1.3338
S2 – 1.3320
S3 (Range Support – Buy) – 1.3302
S4 (Short Breakout) – 1.3248
S5 (Breakout Target 1) – 1.3184
S6 (Breakout Target 2) – 1.3156
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3198
R1 – 1.3339
R2 – 1.3444
R3 – 1.3585
R4 – 1.3726
S1 – 1.3093
S2 – 1.2952
S3 – 1.2847
S4 – 1.2742
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3171
R1 – 1.3546
R2 – 1.3858
R3 – 1.4233
R4 – 1.4608
S1 – 1.2859
S2 – 1.2484
S3 – 1.2172
S4 – 1.1860
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