Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.3102-1.3347. The pair closed at 1.3107, plummeting 1.63% compared to Wednesdays close. It has been the 167th drop in the past 309 trading days, a second consecutive one and also the sharpest one since July 5th, when the pair depreciated 1.99%. The daily low has been the lowest level since July 27th, when a low of 1.3073 was registered. The major pair has neutralized its earlier advance and is now down 0.94% so far during the current month, after losing 0.59% of its value in July.
At 7:09 GMT today GBP/USD was edging up 0.24% on the day to trade at 1.3133. The pair touched a daily high at 1.3139 during the late phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.3121 during early Asian trade.
On Friday GBP/USD trading may be influenced by the following macroeconomic reports as listed below.
Fundamentals
United States
Non-farm Payrolls, Unemployment Rate, Average Hourly Earnings
Employers in all sectors of economy in the United States, excluding the farming industry, probably added 180 000 new jobs in July, according to the median forecast by experts, after a job gain of 287 000 in June. The latter has been the fastest growth rate since October 2015, when a revised up figure of 298 000 was reported. Mays figure has been revised down to just 11 000, as a strike in Verizon caused job losses in information services sector.
Employment in leisure and hospitality rose by 59 000 in June, in health care and social assistance – by 58 000, in information – by 44 000, in professional and business services – by 38 000, and in retail trade – by 30 000. On the other hand, the US mining sector lost 6 000 job positions in June.
Total non-farm payrolls account for 80% of the workers, who produce the entire Gross Domestic Product of the United States. In case of a lower-than-expected gain in jobs in July, demand for the US dollar would be strongly pressured.
Average Hourly Earnings probably increased 0.2% in July compared to the prior month, according to market expectations, following a 0.1% gain to USD 25.61 in June. If expectations were met, July would be the fifth consecutive month of earnings increase.
Meanwhile, the rate of unemployment in the country probably decreased to 4.8% in July, according to market expectations, from 4.9% in June.
The total number of people unemployed rose by 347 000 to 7.8 million in June. Among major groups, the unemployment rates for adult women (4.5%) and Whites (4.4%) went up in June. On the other hand, the rates for adult men (4.5%), teenagers (16.0%), Blacks (8.6%), Asians (3.5%), and Hispanics (5.8%) changed little or not at all.
The number of long-term unemployed (those looking for employment for 27 weeks or more) remained almost unchanged at 1.9 million during June and comprised 25.8% of the unemployed, according to the BLS. At the same time, the number of persons in part-time employment for economic reasons (involuntary part-time workers) went up by 203 000 to 3.8 million in June.
In case the unemployment rate met expectations or even fell further, this would have a bullish effect on the US Dollar, because of the positive implications for consumer spending. The Bureau of Labor Statistics will release the official employment data at 12:30 GMT.
Balance of Trade
The deficit on US balance of trade probably widened to USD 43.10 billion in June, according to market expectations, from a deficit figure of USD 41.14 billion in May. If so, this would be the largest deficit since February, when a revised down gap of USD 46.96 billion was reported.
Total exports fell at a monthly rate of 0.2% in May to reach USD 182.35 billion. Exports of goods dropped USD 0.2 billion to reach USD 119.8 billion during the period, while exports of services shrank USD 0.1 billion to reach USD 62.5 billion.
Total imports, at the same time, rose at a monthly rate of 1.6% to reach USD 223.5 billion in May, after surging 2% in the preceding month. Imports of goods were USD 3.4 billion higher to reach USD 182.1 billion during the period, while imports of services were virtually unchanged at USD 41.4 billion.
In case the trade balance deficit widened more than anticipated in June, this would have a strong bearish effect on the US dollar, because of the negative implications in regard to economic growth. The Bureau of Economic Analysis will release the official trade data at 12:30 GMT.
Bank of England boosts monetary stimulus, cuts borrowing costs to an all-time low
The Sterling lost ground sharply against peers on Thursday, after Bank of England announced a considerable stimulus package. The Bank rate was axed by 25 basis points to a new all-time low of 0.25%, in line with expectations, while the Banks asset purchase program was expanded by GBP 60 billion to GBP 435 billion per month. In addition, BoE introduced a new Term Funding Scheme in order to reinforce the pass-through of the Bank rate cut.
According to extracts from the Monetary Policy Summary, released on August 4th: “The cut in Bank Rate will lower borrowing costs for households and businesses. However, as interest rates are close to zero, it is likely to be difficult for some banks and building societies to reduce deposit rates much further, which in turn might limit their ability to cut their lending rates. In order to mitigate this, the MPC is launching a Term Funding Scheme (TFS) that will provide funding for banks at interest rates close to Bank Rate.”
“The expansion of the Bank of England’s asset purchase programme for UK government bonds will impart monetary stimulus by lowering the yields on securities that are used to determine the cost of borrowing for households and businesses. It is also likely to trigger portfolio rebalancing into riskier assets by current holders of government bonds, further enhancing the supply of credit to the broader economy.”
“The MPC can act further along each of the dimensions of the package by lowering Bank Rate, by expanding the TFS to reinforce further the monetary transmission mechanism, and by expanding the scale or variety of asset purchases. If the incoming data prove broadly consistent with the August Inflation Report forecast, a majority of members expect to support a further cut in Bank Rate to its effective lower bound at one of the MPC’s forthcoming meetings during the course of the year.”
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.211% on August 4th, after which it closed at 0.112% to lose 9 basis points (0.09 percentage point) compared to August 3rd.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.679% on August 4th, after which it fell to 0.647% at the close to lose 2.4 basis points (0.024 percentage point) compared to August 3rd.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.535% on August 4th from 0.469% on August 3rd. The August 4th yield spread has been the highest one since July 29th, when the difference was 0.547%.
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 – 1.3129
R2 – 1.3152
R3 (Range Resistance – Sell) – 1.3174
R4 (Long Breakout) – 1.3242
R5 (Breakout Target 1) – 1.3320
R6 (Breakout Target 2) – 1.3352
S1 – 1.3085
S2 – 1.3062
S3 (Range Support – Buy) – 1.3040
S4 (Short Breakout) – 1.2972
S5 (Breakout Target 1) – 1.2894
S6 (Breakout Target 2) – 1.2862
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
TradingPedia.com is a financial media specialized in providing daily news and education covering Forex, equities and commodities. Our academies for traders cover 
