- GBP/USD has started to consolidate its weekly gains below 1.2500.
- Retail Sales in the UK rebounded sharply in April following March's contraction.
- The risk-positive market environment helps the pound stay resilient against the dollar.
Fueled by the broad-based selling pressure surrounding the dollar, GBP/USD has extended its weekly recovery and climbed above 1.2500 for the first time in two weeks on Thursday. The pair's bullish bias stays intact in the near term but it might find it difficult to attract buyers if it fails to clear the 1.2530 hurdle.
Earlier in the day, the data published by the UK's Office for National Statistics showed that Retail Sales in April rose by 1.4% on a monthly basis. This print came in much better than the market expectation for a decrease of 0.2% and helped the British pound hold its ground.
Additionally, Bank of England (BOE) Chief Economist Huw Pill told Bloomberg TV that they still had "some way to go" in policy tightening and reiterated that inflation was forecast to rise into double digits in 2022.
In the meantime, the UK's FTSE 100 Index is up nearly 2% on the day, suggesting that risk flows dominate the financial markets ahead of the weekend.
The US economic docket will not be featuring any high-impact data releases on Friday and the risk-positive market environment could make it difficult for the dollar to stage a rebound. Nevertheless, the benchmark 10-year US Treasury bond yield is up more than 1%. Considering how the dollar faced strong selling pressure amid falling yields despite risk aversion on Thursday, rising yields on Friday could support the dollar regardless of the market mood.
GBP/USD Technical Analysis
The downward correction witnessed during the Asian session lost momentum near the 20-period SMA on the four-hour chart, suggesting that sellers remain on the sidelines for the time being. Additionally, the Relative Strength Index (RSI) indicator on the same chart edged higher to 60, confirming the bullish bias.
On the upside, 1.2500 (psychological level) aligns as interim resistance ahead of 1.2530 (Fibonacci 38.2% retracement of the downtrend that started on April 21). In case the latter is confirmed as support, the pair could target 1.2600 (psychological level) next.
1.2450 (former resistance, static level, 20-period SMA) forms initial support. The ascending trend line and the 100-period SMA reinforce the Fibonacci 23.6% retracement level at 1.2400. Only a violation of this support could be seen as a significant bearish development and allow sellers to take control of the pair's action. In such a scenario, additional losses toward 1.2350 (static level, 50-period SMA) could be witnessed.
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