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UK retail sales preview: What to expect of GBP/USD

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 19, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    The GBP/USD pair is found support around the hourly 50-MA at 1.4313 while upside is being capped around 1.4340 levels ahead of the data in the UK, which could show retail sales ticked higher in January, following December’s decline.

    Brexit talks may cap retail sales-led gains

    The retail sales could surprise on the positive as indicated by the advance indicators released earlier this month. British Retail Consortium (BRC) data released earlier this month showed retail spending increased 3.3% in January compared with a year ago, up from a 1.0% rise in December. BRC data also showed prices fell slightly less sharply last month mainly due to rise in food inflation.

    A better-than-expected retail sales number could be cheered by markets, however, gains may be capped unless we have positive (pro-EU) news flow out of EU meeting on Brexit.

    Brexit is a major risk and also a major hurdle that keeps the BOE from thinking about rate hike. Consequently, the pickup in sterling following an upbeat retail sales figure could be weak in absence of any news flow regarding EU meeting on Brexit.

    On the other hand, a weaker –than-expected retail sales figure could hurt Sterling bulls. But again, losses in Cable could be restricted if EU meeting ends on a positive (pro-EU) note. To sum up, outcome of the EU meeting could easily overshadow and undo losses/gains triggered by retail sales figure.

    GBP/USD Technical Levels

    The immediate resistance is seen at 1.4369 (5-DMA), above which the spot could test 1.4417 (hourly 200-MA), which if taken out shall open doors for a rally to 1.4443 (38.2% of 1.4079-1.4668). On the other hand, a break below 1.43 would open doors for a drop to 1.4235 (Feb 17 low), under which the spot could test major support at 1.4149 (Jan 29 low).
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