Forex Market: GBP/USD trading outlook for September 20th 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2997-1.3093. The pair closed at 1.3030, edging up 0.20% compared to Fridays close. It has been the 157th gain in the past 341 trading days. The daily low has been an exact test of the low from last Friday and also a level unseen since August 17th, when a low of 1.2978 was registered. The major pair has pared its drop to 0.83% so far during the current month, after losing 0.72% in August.

At 7:14 GMT today GBP/USD was edging up 0.15% on the day to trade at 1.3049. The pair touched a daily high at 1.3067 during the early phase of the European trading session, overshooting the range resistance level (R3), and a daily low at 1.3027 during early Asian trade.

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

Fundamentals

United States

Housing Starts and Building Permits

The number of housing starts in the United States probably fell 1.7% to 1.190 million units in August, according to market expectations, from the seasonally adjusted annual rate of 1.211 million during the prior month. The latter has been the highest number of starts since February, when a revised up level of 1.213 million was reported. In July, starts of single-family houses increased at a monthly rate of 0.5% to 770 000, while starts of buildings with five units or more rose 8.3% to reach 433 000. During the month, housing starts marked the largest increase in the Northeast (15.5%), followed by those in the South (3.5%) and those in the Midwest area (2.3%). On the other hand, housing starts were fewer in the West region (-5.9%).

Meanwhile, the number of building permits in the country probably went up 2.5% to 1.170 million in August from a revised down annual level of 1.144 million in July (1.152 million previously). If expectations were met, this would be the highest level since February, when the revised up 1.177 million units were reported. Single-family authorizations rose at a monthly rate of 3.7% to reach 711 000 units in July, while permits for buildings with five units or more were reported to have increased 6.5% to 411 000. Authorizations were fewer in the Northeast area (-10.2%) and in the West (-8%), while increasing in the Midwest region (10.5%) and in the South (2.6%).

In case a higher-than-anticipated figure for either of the two indicators is reported, this would have a moderate bullish effect on the US dollar. The official housing data are due out at 12:30 GMT.

Bond Yield Spread

The yield on UK 2-year government bonds went up as high as 0.161% on September 19th, after which it closed at 0.137% to lose 1.4 basis points (0.014 percentage point) compared to September 16th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.782% on September 19th, or the highest level since September 14th (0.802%), after which it fell to 0.778% at the close to add 0.008 percentage point compared to September 16th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.641% on September 19th from 0.619% on September 16th. The September 19th yield spread has been the largest one since September 5th, when the difference was 0.665%.

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 – 1.3039
R2 – 1.3048
R3 (Range Resistance – Sell) – 1.3056
R4 (Long Breakout) – 1.3083
R5 (Breakout Target 1) – 1.3114
R6 (Breakout Target 2) – 1.3126

S1 – 1.3021
S2 – 1.3012
S3 (Range Support – Buy) – 1.3004
S4 (Short Breakout) – 1.2977
S5 (Breakout Target 1) – 1.2946
S6 (Breakout Target 2) – 1.2934

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

Central Pivot Point – 1.3117
R1 – 1.3236
R2 – 1.3469
R3 – 1.3588
R4 – 1.3708

S1 – 1.2884
S2 – 1.2765
S3 – 1.2532
S4 – 1.2300

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