Friday’s trade (in GMT terms) saw GBP/USD within the range of 1.3253-1.3355. The pair closed at 1.3293, edging up 0.19% compared to Thursdays close. It has been the 151st gain in the past 330 trading days and also a third consecutive one. The daily high has been a level unseen since August 3rd, when a high of 1.3374 was registered. In weekly terms, GBP/USD added 1.18% to its value during the current week. It has been the 18th gain in the past 35 weeks and also a third consecutive one. The major pair has increased its advance to 1.17% so far during the current month, after losing 0.72% in August.
On Monday (September 5th) GBP/USD trading may be influenced by the following macroeconomic report listed below.
Fundamentals
United Kingdom
Services PMI by Markit/CIPS
Activity in United Kingdom’s sector of services probably remained unchanged in August, with the corresponding PMI coming in at a reading of 50.0, according to market expectations. In July the gauge stood at a final 47.4, which matched the preliminary value reported on July 22nd. The latter has been the first contraction reading since December 2012, as the EU membership referendum outcome strongly influenced business conditions in the sector.
In July, the gauges of output and new orders both declined at the fastest rates in more than 7 years. At the same time, the sub-index of employment remained unchanged, which followed a 3.5-year period of constant job creation.
The index is based on a survey, encompassing managers of companies, operating in sectors such as transportation, communications, IT, financial intermediation, and tourism. They are asked about their estimate regarding current business conditions in terms of new orders, output, employment, demand in the future. Values below the key level of 50.0 signify predominant pessimism (contraction in general activity) and vice versa. In case the PMI came in line with the median forecast, or went into the area of expansion in August, this would have a moderate-to-strong bullish effect on the Sterling. The Chartered Institute of Purchasing and Supply (CIPS) is expected to release the official reading at 8:30 GMT.
US Labor Day
Every year, the first Monday of September marks the Labor Day holiday in the United States. Banks in the country are to remain closed.
Correlation with other Majors
Taking into account the business week ended on September 2nd 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 (0.9528, or very strong)
GBP/USD to USD/JPY (0.6903, or strong)
GBP/USD to AUD/USD (0.5569, or strong)
GBP/USD to EUR/USD (0.2579, or weak)
GBP/USD to USD/CAD (-0.2864, or weak)
GBP/USD to USD/CHF (-0.3666, or moderate)
1. During the examined period GBP/USD moved almost equally in one and the same direction with NZD/USD.
2. GBP/USD moved strongly in one and the same direction with USD/JPY and AUD/USD during the week.
3. The correlation between GBP/USD and EUR/USD, GBP/USD and USD/CAD was insignificant.
Bond Yield Spread
The yield on UK 2-year government bonds went as high as 0.160% on September 2nd, after which it closed at 0.135% to add 1.2 basis points (0.012 percentage point) compared to September 1st.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.806% on September 2nd, after which it fell to 0.794% at the close to add 0.008 percentage point compared to September 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 0.659% on September 2nd from 0.663% on September 1st. The September 2nd yield spread has been the lowest one since August 31st, when the difference was 0.655%.
Daily, Weekly and Monthly Pivot Levels
By employing the Camarilla calculation method, the Monday levels of importance for GBP/USD are presented as follows:
R1 – 1.3302
R2 – 1.3312
R3 (Range Resistance – Sell) – 1.3321
R4 (Long Breakout) – 1.3349
R5 (Breakout Target 1) – 1.3382
R6 (Breakout Target 2) – 1.3395
S1 – 1.3284
S2 – 1.3274
S3 (Range Support – Buy) – 1.3265
S4 (Short Breakout) – 1.3237
S5 (Breakout Target 1) – 1.3204
S6 (Breakout Target 2) – 1.3191
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3236
R1 – 1.3412
R2 – 1.3531
R3 – 1.3707
R4 – 1.3883
S1 – 1.3117
S2 – 1.2941
S3 – 1.2822
S4 – 1.2703
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.3126
R1 – 1.3387
R2 – 1.3634
R3 – 1.3895
R4 – 1.4155
S1 – 1.2879
S2 – 1.2618
S3 – 1.2371
S4 – 1.2123
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