Friday’s trade (in GMT terms) saw GBP/USD within the range of 1.2915-1.3090. The pair closed at 1.2964, shedding 0.87% compared to Thursdays close. It has been the 186th drop in the past 345 trading days and also the steepest one since September 16th. The daily low has been a level unseen since August 16th, when a low of 1.2878 was registered. In weekly terms, GBP/USD lost 0.31% of its value during the past week. It has been the 20th drop in the past 38 weeks and also a third consecutive one. The major pair has increased its drop to 1.33% so far during the current month, after losing 0.72% in August.
At 7:28 GMT today GBP/USD was edging down 0.23% on the day to trade at 1.2934. The pair touched a daily high at 1.2989 during the early phase of the Asian trading session, overshooting the daily R1 level, and a daily low at 1.2932 during early European trade.
On Monday GBP/USD trading may be influenced by the following reports and other events as listed below.
Fundamentals
United States
Fed Speakers
At 13:30 GMT Federal Open Market Committee member Neel Kashkari is to take a statement, followed by Daniel Tarullo at 15:45 GMT and Robert Kaplan at 17:30 GMT. Any remarks in regard to the Bank’s policy stance or US economic outlook would certainly heighten USD volatility.
New Home Sales
Sales of new single-family homes probably decreased 8.8% to the seasonally adjusted annual rate of 597 000 in August, according to market expectations, from 654 000 reported in July. The latter has been the highest level since October 2007. Sales in the Northeast area grew 40% to 35 000 in July, those in the South went up 18.1% to 398 000, while sales in the Midwest increased 1.2% to 84 000. On the other hand, new home sales in the West remained unchanged at 137 000.
The median sales price of new houses sold went down as low as USD 294 600 in July, after being at USD 310 500 in the preceding month. The average sales price rose to USD 355 800 in July from a revised down USD 353 500 in June. At the end of the month, the seasonally adjusted estimate of new houses for sale was 233 000, down 2.9% from a month ago. It has been the lowest level so far in 2016 and represents a supply of 4.3 months at the current sales rate, according to the report by the US Census Bureau.
In case the index decreased more than anticipated, this would have a strong bearish effect on the US Dollar. The Census Bureau is to report the official figure at 14:00 GMT on Monday.
Correlation with other Majors
Taking into account the business week ended on September 23rd 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 (0.5676, or strong)
GBP/USD to AUD/USD (0.2685, or weak)
GBP/USD to EUR/USD (0.0272, or very weak)
GBP/USD to USD/CHF (-0.2131, or weak)
GBP/USD to USD/JPY (-0.2891, or weak)
GBP/USD to USD/CAD (-0.7266, or strong)
1. During the examined period GBP/USD moved strongly in one and the same direction with NZD/USD, while moving strongly in the opposite direction compared to USD/CAD.
2. GBP/USD moved almost independently compared to EUR/USD during the past week.
3. The correlation between GBP/USD and AUD/USD, GBP/USD and USD/CHF, GBP/USD and USD/JPY was insignificant.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.114% on September 23rd, after which it closed at 0.107% to add 2.6 basis points (0.026 percentage point) compared to September 22nd.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.787% on September 23rd, after which it fell to 0.758% at the close to lose 1.6 basis points (0.016 percentage point) compared to September 22nd.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, narrowed to 0.651% on September 23rd from 0.693% on September 22nd. The September 23rd yield spread has been the lowest one since September 19th, when the difference was 0.637%.
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 – 1.2980
R2 – 1.2996
R3 (Range Resistance – Sell) – 1.3012
R4 (Long Breakout) – 1.3060
R5 (Breakout Target 1) – 1.3116
R6 (Breakout Target 2) – 1.3140
S1 – 1.2948
S2 – 1.2932
S3 (Range Support – Buy) – 1.2916
S4 (Short Breakout) – 1.2868
S5 (Breakout Target 1) – 1.2812
S6 (Breakout Target 2) – 1.2788
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.3001
R1 – 1.3086
R2 – 1.3209
R3 – 1.3294
R4 – 1.3380
S1 – 1.2878
S2 – 1.2793
S3 – 1.2670
S4 – 1.2548
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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