GBP/USD Forecast: Sterling needs to withhold above 1.3380 to keep up with retail sales boost ahead of GDP report
|- The UK retail sales rose 1.6% m/m in April coming out well above market expectations while core retail sales stripping the comparison base of the auto motor fuel sales rose 1.3% m/m.
- Sterling rose 100 pips above its cyclical low boosted by expectations of the upward revision to the first quarter GDP due this Friday.
The GBP/USD is trading up 0.5% at around 1.3410 against the US Dollar after the UK retail sales for April came out strongly above expectations boosting hopes for upward revision of the first quarter GDP due on Friday.
The UK retail sales rose 1.6% m/m in April coming out well above market expectations of 0.7% m/m increase while core retail sales stripping the comparison base of the auto motor fuel sales rose 1.3% m/m compared to 0.4% m/m expected.
Total retail sales in the UK rose 1.4% over the year in April while core retail sales excluding auto motor fuel sales rose 1.5% y/y.
"Retail sales bounced back in April, as petrol and other sales recovered from the snowfall. But the underlying position remains subdued with the volume of goods sold over the last six months broadly unchanged,” Rob Kent-Smith, Head of National Accounts from the Office for National Statistics said in the report on Thursday.
Technically the GBP/USD needs to hold above 1.3380 representing 61.8% Fibonacci retracement line of the previous upmove from 1.2440 to 1.4377 22-month hight to confirm the corrective reversal. The Momentum and the Relative Strength Index analysis on 1-hour chart jumped up strongly and Slow Stochastics made a bearish crossover just below the territory indicating the overbought condition. Should GBP/USD close above 1.3380 and will be supported by better than expected fundamentals, the currency pair has potential to correct to 1.3460-1.3500, previous support zone. The bearish trend on GBP/USD prevails with disappointing fundamental headlines pushing the pair towards 1.3300.
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