GBP/USD Forecast: Door opens to 1.3530 after dismal UK data

GBP/USD has come under renewed bearish pressure on Friday.
Disappointing UK data and failure of 1.3600 support points to further losses.
Next support for the pair aligns at 1.3530.

Eren Sengezer FXStreet

GBP/USD has lost its traction early Friday and declined below the key 1.3600 support area, attracting bears. The near-term technical outlook suggests that the pair could extend its slide ahead of the weekend and 1.3530 aligns as the next target on the downside.

Earlier in the session, the UK's Office for National Statistics reported that Retail Sales in December declined by 3.7% on a monthly basis. This print missed the market expectation for a decrease of 0.6% by a wide margin. Although GBP/USD's initial reaction to this print was largely muted, the UK's FTSE 100 opened deep in the negative territory and weighed on the pair. As of writing, the index was losing more than 1% on a daily basis.

The US economic docket will not be featuring any high-tier macroeconomic data releases in the remainder of the day and GBP/USD could find it difficult to shake off the bearish pressure in case safe-haven flows continue to influence markets. The S&P Futures are down 0.3% during European trading hours, pointing to a bearish gap in the S&P 500 after the opening bell.

On the other hand, the benchmark 10-year US Treasury bond yield is edging lower for the third straight day on Friday, limiting the greenback's gains for the time being. Investors are likely to favour the dollar over the British pound in the current risk-averse market environment, at least in the short term, regardless of US T-bond yields' action.

GBP/USD Technical Analysis

GBP/USD is trading below the 100-period SMA on the four-hour chart for the first time in nearly a month. The Relative Strength Index (RSI) indicator on the same chart is still above 30, suggesting that there is more room on the downside before the pair becomes technically oversold.

On the downside, 1.3530 (Fibonacci 38.2% retracement of the one-month-old uptrend) could be seen as the next bearish target ahead of 1.3500 (psychological level).

Resistances are located at 1.3600 (psychological level, Fibonacci 23.6% retracement, 100-period SMA) and 1.3650 (50-period SMA, static level).

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Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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