Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2916-1.2989. The pair closed at 1.2975, inching up 0.08% compared to Fridays close. It has been the 160th gain in the past 346 trading days. The daily low has been an almost exact test of the low from last Friday and also a level unseen since August 16th, when a low of 1.2878 was registered. The major pair has trimmed its drop to 1.25% so far during the current month, after losing 0.72% in August.
At 7:20 GMT today GBP/USD was edging up 0.15% on the day to trade at 1.2994. The pair touched a daily high at 1.3009 during the early phase of the European trading session, undershooting the upper range breakout level (R4), and a daily low at 1.2950 during early Asian trade.
On Tuesday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United States
S&P Case-Shiller Home Price Index
At 13:00 GMT Standard & Poor’s/Case-Schiller will report on the performance of their House Price Index, which measures the change in values of single-family homes in 20 metropolitan areas across the United States. The report serves as a gauge of the US housing market’s health. According to the median estimate by experts, home prices in the 20 areas probably rose 5.1% in July compared to July 2015, while matching the rate in June. It has been the lowest annual increase since August 2015. In June, home values in Portland recorded the highest annual increase (up 12.36%), followed by Seattle (up 11%) and Denver (up 9.2%). Within a recovering economy, a slower-than-projected gain in prices will usually have a limited-to-moderate bearish effect on the local currency.
Services PMI by Markit – preliminary reading
Activity in the US sector of services probably increased at a faster rate in September from a month ago, with the corresponding preliminary Purchasing Managers’ Index coming in at a reading of 51.2, according to the median forecast by experts, from a final 51.0 in August. The latter has been the lowest PMI level since February, when a final 49.7 was reported. According to Markit, in August, new business growth was subdued, while employment in the sector grew at the slowest rate since December 2014.
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 & restaurants. Values above the key level of 50.0 indicate predominant optimism (expansion in general activity). In case a faster than-expected expansion in services sector activity is reported, this would have a moderate bullish effect on the US dollar, as services contribute to a considerable portion of the US GDP. The preliminary reading by Markit Economics is due out at 13:45 GMT.
Consumer Confidence Index by the CB
Confidence among consumers in the United States probably eased in September, with the corresponding index coming in at a reading of 99.0, according to market expectations. In August the gauge was reported at 101.1, while confounding the median estimate pointing to a slowdown to 97.0. It has been the highest level of confidence since September 2015, when the gauge came in at a revised down 102.6 (103.0 previously).
This indicator measures the level of individuals’ confidence in the US economic development. It is considered as a leading indicator, as it gives an early insight into consumer spending, which accounts for a major part of the nation’s GDP.
In case the index slowed down more than anticipated, this would have a strong bearish effect on the US dollar, as lower confidence suggests a lesser willingness to spend and, respectively, a slower economic growth. The Conference Board research group is to publish the official index reading at 14:00 GMT.
Fed’s Fischer statement
At 15:15 GMT Fed’s vice chairman, Stanley Fischer, is expected to speak on the topic “Why Study Economics?” in front of the Howard University Economic Convocation. Any hints in regard to the Bank’s policy stance or US economic outlook would certainly heighten USD volatility.
Bank of England initiates corporate bond-purchasing scheme
Today Bank of England (BoE) is to launch a corporate bond-buying program in its latest round of quantitative easing. Three “reverse auctions” are to be conducted during the current week, while each of them will focus on the purchase of bonds from particular sectors of the economy. Today’s auction is to target segments such as utilities and manufacturing industries.
The central bank plans to purchase corporate bonds at the amount of GBP 10 billion during the upcoming 18 months. The banks list will feature only the debt of corporate entities, which “make a material contribution to economic activity in the UK”. However, the list of eligible bonds also features the debt of a number of foreign entities such as US technological giant Apple and fast-food chain McDonalds.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.113% on September 26th, after which it closed at 0.080% to lose 2.7 basis points (0.027 percentage point) compared to September 23rd.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.758% on September 26th, after which it fell to 0.750% at the close to lose 0.008 percentage point compared to September 23rd.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.670% on September 26th from 0.651% on September 23rd. The September 26th yield spread has been the largest one since September 22nd, when the difference was 0.693%.
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 – 1.2982
R2 – 1.2988
R3 (Range Resistance – Sell) – 1.2995
R4 (Long Breakout) – 1.3015
R5 (Breakout Target 1) – 1.3039
R6 (Breakout Target 2) – 1.3048
S1 – 1.2968
S2 – 1.2962
S3 (Range Support – Buy) – 1.2955
S4 (Short Breakout) – 1.2935
S5 (Breakout Target 1) – 1.2911
S6 (Breakout Target 2) – 1.2902
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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