GBP/USD Forecast: still in search of a firm direction, UK retail sales eyed
|The GBP/USD pair remains with a broader trading range set after a dovish BoE rate hike, with dips below the 1.3100 handle being bought into and the bulls struggling to keep it above the 1.3200 mark. Wednesday's better-than-expected headline UK employment figures, coupled with persistent US Dollar selling bias did provide a minor boost to the pair. However, a sharp contraction in the overall employment, worst since 2015, raised concerns that Brexit might now be impacting the labor markets. Adding to this, subdued wage growth is now expected to further squeeze household spending power and dampened prospects of any additional BoE rate hike action in the near future. Moreover, the US Dollar also gained some respite following the release of slightly better-than-expected US economic data and further collaborated towards keeping a lid on the major.
With the US tax bill headlines turning out to be an exclusive driver of the USD price action, investors would remain focused on the key vote on the legislation, due later on Thursday. In the meantime, the UK monthly retail sales data, expected to show a modest rise of 0.1% m-o-m in October as compared to drop of 0.8% in September, will be looked upon for some momentum to assist the pair to break through its near-term trading range. A negative reading would further reduce odds of another interest rate hike by the BoE and deteriorate the outlook for the British pound.
Technically, the pair remains positioned in a neutral territory and traders are likely to wait for a decisive break through the mentioned range before positioning for the next directional move. Below the 1.3100 handle, the pair might continue to find support near the 1.3060-50 region, which if broken is likely to accelerate the slide towards the 1.30 psychological mark. Some follow-through selling pressure might continue dragging the pair further towards the 1.2950 support, marking the 61.8% Fibonacci expansion level of the 1.3657-1.3027 downslide and its subsequent rebound.
On the upside, momentum beyond the 1.3200 handle might continue to confront fresh supply near the 1.3225-30 region, above which a bout of short-covering could lift the pair towards the 1.3300 handle. A convincing move above the mentioned barriers might now negate any near-term bearish bias and pave way for extension of the pair's up-move in the near-term.
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