Forex Market: GBP/USD trading outlook for October 12th 2016

Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2089-1.2378. The pair closed at 1.2122, plummeting 1.93% compared to Mondays close. It has been the 193rd drop in the past 357 trading days, a fourth consecutive one and also the steepest one since July 5th. The major pair has increased its slump to 6.60% so far during the current month, after losing 1.23% in September.

At 6:56 GMT today GBP/USD was advancing 1.19% on the day to trade at 1.2266. The pair touched a daily high at 1.2327 during the mid phase of the Asian trading session and a daily low at 1.2105 during early Asian trade.

The Sterling sharply rebounded from recent lows against the US Dollar, as “hard Brexit” fears eased. Several media reported that UK Prime Minister, Theresa May, has agreed on conducting a parliamentary vote on an eventual Brexit plan.

On Wednesday GBP/USD trading may be influenced by the following macroeconomic reports and other releases as listed below.

Fundamentals

United States

Job Openings

The number of job openings in the United States probably dropped to 5.724 million in August, according to the median forecast by experts, from 5.871 million during the preceding month. In July, the number of positions waiting to be filled rose mostly in professional and business services (166 000) and durable goods manufacturing (27 000), while decreasing in health care and social assistance (-63 000).

This indicator refers to all job positions that are open, but not filled on the last business day of the month. Job openings are part of the Job Openings and Labor Turnover Survey (JOLTS), which gathers data from about 16 400 non-farm establishments including retailers and manufacturers, as well as federal, state, and local government entities in the 50 states and the District of Columbia. The survey assesses the unmet demand for labor in the labor market. A lower-than-projected level of job openings will usually have a limited bearish effect on the US Dollar. The Bureau of Labor Statistics is to release the official report at 14:00 GMT.

FOMC Minutes

At 18:00 GMT the Federal Open Market Committee (FOMC) will release the minutes from its meeting on policy held on September 20th-21st. The minutes offer detailed insights on FOMC’s monetary policy stance. This release will be closely examined by market players, as it may provide clues over how the Fed’s policy tightening cycle will develop in the future. High volatility of the currency pairs containing the US dollar is usually present after the publication.

The FOMC left the target range for the federal funds rate intact between 0.25% and 0.50% for a sixth consecutive meeting in September, as largely expected. Policy makers said the case for a rate hike this year was stronger, with 3 out of 10 members of the Committee voting in favor of raising borrowing costs

Bond Yield Spread

The yield on UK 2-year government bonds went up as high as 0.237% on October 11th, or the highest level since June 30th (0.249%), after which it closed at 0.211% to lose 0.004 percentage point compared to October 10th.

Meanwhile, the yield on US 2-year government bonds climbed as high as 0.874% on October 11th, after which it fell to 0.869% at the close to lose 0.001 percentage point compared to October 10th.

The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.658% on October 11th from 0.655% on October 10th. The October 11th yield spread has been the largest one since October 6th, when the difference was 0.725%.

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 – 1.2148
R2 – 1.2175
R3 (Range Resistance – Sell) – 1.2201
R4 (Long Breakout) – 1.2281
R5 (Breakout Target 1) – 1.2374
R6 (Breakout Target 2) – 1.2412

S1 – 1.2096
S2 – 1.2069
S3 (Range Support – Buy) – 1.2043
S4 (Short Breakout) – 1.1963
S5 (Breakout Target 1) – 1.1870
S6 (Breakout Target 2) – 1.1832

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

Central Pivot Point – 1.2443
R1 – 1.2940
R2 – 1.3444
R3 – 1.3941
R4 – 1.4437

S1 – 1.1939
S2 – 1.1442
S3 – 1.0938
S4 – 1.0433

In monthly terms, for GBP/USD we have the following pivots:

Central Pivot Point – 1.3113
R1 – 1.3312
R2 – 1.3645
R3 – 1.3844
R4 – 1.4042

S1 – 1.2780
S2 – 1.2581
S3 – 1.2248
S4 – 1.1914