The GBP/USD rose to an intraday high of 1.5671 before turning lower to 1.5590 after the data showed UK retail sales in June unexpectedly contracted. The weak tone on the GBP strengthened further in the US session after the weekly jobless claims in the US printed at four-decade low. The pair dropped to a low of 1.5502 and continues to trade in the sideways manner around 1.5510 in the Asian session today.
GBP hurt by weak UK retail sales
The drop in the retail sales, though an unexpected one, contradicts the biggest increase in total pay over a three-month period in June since April 2010. The UK CPI also fell back to 0% in June from 0.2% in May. Core CPI slipped back to 0.8% year-on-year, compared to the previous month’s figure of 0.9%. Moreover, the British Pound did not witness a sharp sell-off after the drop in CPI was reported earlier this month, since the markets were optimistic that it would have resulted in higher consumption. However, with a fall in retail consumption reported yesterday, the British Pound appears vulnerable.
Technicals – Bearish below inverted head & shoulder neckline support
The spot suffered a bearish close on the 4-hour and hourly chart below the inverted head and shoulder neckline (extended) support. The price attempted to break above the same located at 1.5516, but failed. The sell-off also pushed the daily RSI below 50.00, opening doors for further weakness. A break below 1.55 could push the pair lower to 1.5459 (61.8% of June rally). On the other hand, a corrective move to 1.5549 (50% of June rally) cannot be ruled out, but fresh bids could be seen only in case the spot witnesses a hourly close above the same.
EUR/USD Analysis: Weak PMIs could lead to a break below 1.0963
The EUR/USD was volatile on Thursday, rising from 1.0923 in European morning breaching Tuesday's high at 1.0969 to 1.1019 in New York morning as the Greek parliament approved a second set of reforms required to start negotiations with creditors. However, the pair later fell back to 1.0952 after upbeat US jobless claims printed at four-decade low. The renewed buying lifted the pair to 1.1016 near New York close, but once again ran into offers and fell back to 1.0964 levels in the Asian session today.
Focus on Eurozone PMIs
The latest preliminary Eurozone PMI survey’s are due for release today. The markets are curious to see if the Grexit uncertainty has negatively impacted the private sector activity. A weaker-than-expected Eurozone and German PMI figures could lead to a break below the crucial support at 1.0963. On the other hand, better-than-expected data could lead to a re-test of 1.1120.
Technicals – Double top at 1.1010-1.1020
The hourly chart shows a double top formation with the neckline support at 1.0963 (76.4% of May-June rally). A break below the same could open doors for a sell-off to 1.0921 (hourly 200-MA). Meanwhile, repeated failure to take out the support at 1.0963 may see the spot re-test 1.1020. It is a break above 1.1020 could push the pair to 1.1053 (61.8% Fib of May-June rally). However, the likelihood of the spot breaking below 1.0963 would increase in case the spot fails to take out 1.10 (100-DMA).
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