USD Stumbles on Disappointing Retail Sales; GBP/USD Tests Resistance

Technical Sentiment: Bullish

Key Takeaways

• The British Pound gained some bullish momentum based on smaller than expected 6.6% Unemployment Rate;
• USD Core Retail Sales m/m up only 0.1% vs. forecast 0.4%, Retail Sales m/m rise only 0.3% vs. 0.5%;
• Unemployment Claims add 4000 in the last week, up to 317K.

Today Cable added to its already positive sentiment as the USD took a small hit on disappointing Retail Sales and Unemployment Claims, favoring a break above the resistance hurdle at 1.6844 in the coming sessions.

 

Technical Analysis

GBP/USD is trading at 1.6830 in the early hours of the US sessions, following through with the Tuesday’s bullish tone set by the U.K. lower than expected Unemployment Rate. The pair has formed two Lower Lows and two Lower Highs in the last month, yet it could easily reverse this bearish bias if another rally breaks above the immediate large resistance hurdle.

Cable has already provided the first weakness signal when it failed to reach 1.6700 and print a fresh low after last week’s rejection off 1.6844. The most recent Lower High, priced at 1.6844, is the current resistance. In the same area, the 200 Simple Moving Average on the 4H time frame also backs this resistance, together with a major Fibonacci Confluence spanning between 1.6832-44 (50% and 38.2% Retracement levels based on the last two Highs with the Low at 1.6692).

A rally above 1.6844 will reverse the direction completely and GBP/USD will be aiming to print Higher Highs, first in the 1.6920 area, then towards the psychological handle at 1.7000.

If the pair fails to continue above 1.6844, it will adopt a range personality between this level and the support area at 1.6740. Long trades above the resistance hurdle, followed by buying on any future dips remains the preferred strategy for GBP/USD at the moment.

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Prepared by Alexandru Z., Chief Currency Strategist at Capital Trust Markets