Forex Market: GBP/USD daily trading outlook

Friday’s trade saw GBP/USD within the range of 1.5679-1.5547 to settle up 0.15% at 1.5624, closing the week 0.7% higher after a 0.6% drop the previous week.

At 07:10 GMT today GBP/USD was up 0.07% to trade at 1.5640. The cross held in a daily range of 1.5616 – 1.5645.

Fundamental view

United Kingdom

Activity in Britain’s sector of manufacturing probably grew at a slightly faster pace in July compared to a month earlier, with the corresponding final PMI reading expected to come in at 51.6 from 51.4 in June. If confirmed, this would be the 28th straight month of expansion in the sector.

The index is based on a survey encompassing managers of about 600 companies that operate in the sector of manufacturing. They are asked about their estimate in regard to current business conditions in the sector in terms of new orders, output, employment, demand in the future. Values above 50.0 signify that respondents are rather optimists than pessimists, while a reading below the level 50 threshold indicates an overall contraction in activity during the tracked period. Higher-than-projected PMI readings would boost demand for the sterling. The Chartered Institute of Procurement & Supply (CIPS) is expected to publish the official reading at 08:30 GMT.

United States

Personal spending in the United States probably rose 0.2% in June on a monthly basis, while personal income likely increased by 0.3%. Spending rose a better-than-expected 0.9% in May, while personal income jumped 0.5% during the same month. Higher-than-expected rates of increase imply good employment conditions and consumer sentiment and are therefore dollar positive.

The Core Personal Consumption Expenditure Index, a gauge measuring the price of goods and services purchased by consumers for the purpose of consumption, likely rose 0.1% in June, keeping the same pace of growth for a sixth month, while year-on-year the index will probably show an increase of 1.2%. It excludes the more volatile food and energy items. The Bureau of Economic Analysis is to publish the official figures at 12:30 GMT.

US manufacturing

At 13:45 GMT, the final reading of Markits Manufacturing Purchasing Managers Index for July will probably match a preliminary estimate of 53.8 released on July 24th. Julys preliminary reading reflected a slight rebound from Junes final reading of 53.6, a 20-month low, with output and new business volumes expanding at a faster rate, although job creation eased to the weakest since April.

“A modest upturn in the headline manufacturing PMI belies some more worrying undercurrents which point to potential weakness in coming months,” said in the report Chris Williamson, Chief Economist at Markit. “Manufacturing has been stuck in a lower gear in recent months compared to the strong expansion seen through much of last year, linked to weak exports and uncertainty about the economic outlook at home and abroad… Weak demand, as well as reduced import costs arising from the strong dollar, meanwhile also continued to help drive down inflationary pressures.”

A separate and more widely tracked report on US manufacturing activity is also expected to show it grew last month. The ISM Manufacturing PMI is pegged at 53.5, the same as a month earlier, which topped projections and reflected an uptick in new orders and job creation.

Participants can either respond with “better”, “same”, or “worse” to the questions about the industry in which they operate. The resulting PMI value is measured from 0 to 100. If the index shows a value of 100.0, this means that 100% of the respondents reported an improvement in conditions. If the index shows a value of 0, this means that 100% of the respondents reported a deterioration in conditions. If 100% of the respondents saw no change in conditions, the index will show a reading of 50.0. Therefore, readings above the key level of 50.0 are indicative of expanding activity in the sector. In case the PMI accelerated more than anticipated, this would have a bullish effect on the greenback. The Institute for Supply Management (ISM) is to release the official reading at 14:00 GMT.

Pivot points

According to Binary Tribune’s daily analysis, the pair’s central pivot point stands at 1.5617. In case it penetrates the first resistance level at 1.5686, it will encounter next resistance at 1.5749. If breached, upside movement may attempt to advance to 1.5818.

If the cross drops below its S1 level at 1.5554, it will next see support at 1.5485. If the second key support zone is breached, downward movement may extend to 1.5422.

In weekly terms, the central pivot point is at 1.5601. The three key resistance levels are as follows: R1 – 1.5714, R2 – 1.5803, R3 – 1.5916. The three key support levels are: S1 – 1.5512, S2 – 1.5399, S3 – 1.5310.