Yesterday’s trade (in GMT terms) saw GBP/USD within the range of 1.2206-1.2282. The pair closed at 1.2243, unchanged compared to Mondays close. The daily high has been a level not seen since October 20th, when a high of 1.2300 was registered. The major pair depreciated 5.66% in October, after losing another 1.23% in September.
At 8:15 GMT today GBP/USD was edging up 0.26% on the day to trade at 1.2275. The pair touched a daily high at 1.2286 during the early phase of the European trading session, overshooting the upper range breakout level (R4), and a daily low at 1.2221 during early Asian trade.
On Wednesday GBP/USD trading may be influenced by the following macroeconomic reports and other events as listed below.
Fundamentals
United Kingdom
Construction PMI by Markit/CIPS
Activity in United Kingdom’s sector of construction probably increased at a slower pace in October, with the corresponding Purchasing Managers’ Index coming in at a reading of 51.8, according to market expectations. In September, the index stood at 52.3, rebounding from August’s 7-year low (49.2), mostly supported by a recovery in residential building. The sub-gauge of new orders also recovered in September, ending a four-month series of contraction, while employment in the sector went up slightly.
The index is based on a survey, encompassing managers of companies, operating in the construction sector. They are asked about their estimate regarding current business conditions (new orders, output, employment, demand in the future). Values above the key level of 50.0 signify predominant optimism in regard to business conditions. In case the PMI met expectations or decelerated more in October, this would have a limited-to-moderate bearish effect on the Sterling. The Chartered Institute of Purchasing and Supply (CIPS) is to release the official index reading at 9:30 GMT.
United States
Change in employment by the ADP
Employers in the US non-farm private sector probably added 165 000 new jobs during October, according to the median estimate by experts, following 154 000 new positions added in September. The latter has been the slowest employment growth since April, when the revised down 149 000 new jobs were reported.
In September, employment in the goods-producing sector grew by 3 000, while employment in services increased by 151 000. Employment in trade, transportation and utilities grew by 15 000 during the month, in professional and business services – by 45 000 and in financial activities – by 11 000. Meanwhile, employment in US construction rose by 11 000 and fell by 6 000 in the manufacturing industry.
In case new job growth was higher than expected in October, this would have a moderate-to-strong bullish effect on the US dollar. The official figure is scheduled to be released at 12:15 GMT.
FOMC policy decision
The Federal Open Market Committee (FOMC) will probably keep the target range for the federal funds rate intact between 0.25% and 0.50% at its two-day policy meeting, scheduled to be concluded today, according to the median forecast by experts.
In September, the target range was left intact for a sixth meeting in a row. The FOMC Minutes, released on October 12th, revealed that September’s decision was a close call, while the case for raising rates had become stronger during the past several months, which suggested a hike in 2016 was still a possibility.
”Participants generally agreed that the case for increasing the target range for the federal funds rate had strengthened in recent months. Many of them, however, expressed the view that recent evidence suggested that some slack remained in the labor market. With inflation continuing to run below the Committees 2 percent objective and few signs of increased pressure on wages and prices, most of these participants thought it would be appropriate to await further evidence of continued progress toward the Committees statutory objectives”, the Minutes stated.
”In contrast, some other participants believed that the economy was at or near full employment and inflation was moving toward 2 percent. They maintained that a further delay in raising the target range would unduly increase the risk of the unemployment rate falling markedly below its longer-run normal level, necessitating a more rapid removal of monetary policy accommodation that could shorten the economic expansion. In addition, several participants expressed concern that continuing to delay an increase in the target range implied a further divergence from policy benchmarks based on the Committees past behavior…”
”Some participants believed that it would be appropriate to raise the target range for the federal funds rate relatively soon if the labor market continued to improve and economic activity strengthened, while some others preferred to wait for more convincing evidence that inflation was moving toward the Committees 2 percent objective”, the document revealed.
The FOMC will announce its official decision on policy at 18:00 GMT.
Bond Yield Spread
The yield on UK 2-year government bonds went up as high as 0.297% on November 1st, after which it closed at 0.259% to lose 0.008 percentage point compared to October 31st.
Meanwhile, the yield on US 2-year government bonds climbed as high as 0.873% on November 1st, or the highest level since October 28th (0.900%), after which it fell to 0.833% at the close to lose 1.2 basis points (0.012 percentage point) compared to October 31st.
The spread between 2-year US and 2-year UK bond yields, which reflects the flow of funds in a short term, widened to 0.574% on November 1st from 0.578% on October 31st. The November 1st yield spread has been the lowest one since October 28th, when the difference was 0.565%.
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 – 1.2250
R2 – 1.2257
R3 (Range Resistance – Sell) – 1.2264
R4 (Long Breakout) – 1.2285
R5 (Breakout Target 1) – 1.2309
R6 (Breakout Target 2) – 1.2319
S1 – 1.2236
S2 – 1.2229
S3 (Range Support – Buy) – 1.2222
S4 (Short Breakout) – 1.2201
S5 (Breakout Target 1) – 1.2177
S6 (Breakout Target 2) – 1.2167
By using the traditional method of calculation, the weekly levels of importance for GBP/USD are presented as follows:
Central Pivot Point – 1.2182
R1 – 1.2282
R2 – 1.2373
R3 – 1.2473
R4 – 1.2572
S1 – 1.2091
S2 – 1.1991
S3 – 1.1900
S4 – 1.1808
In monthly terms, for GBP/USD we have the following pivots:
Central Pivot Point – 1.2379
R1 – 1.2812
R2 – 1.3380
R3 – 1.3813
R4 – 1.4245
S1 – 1.1811
S2 – 1.1378
S3 – 1.0810
S4 – 1.0241
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