GBP/USD Forecast: Sterling destined to fall even with UK retail sales rising strongly

The GBP/USD is trading flat at around 1.2720 after the UK retail sales rose strongly in July.
The GBP/USD retreated from the 14-month low of 1.2666 but remains capped by 1.2750.
The UK retail sales rose 0.7% in July after falling -0.5% m/m in June while core retail sales excluding motor fuel sales rose 0.9% in July after falling -0.6% m/m in June.

Mario Blascak, PhD Independent Analyst

The GBP/USD remains under selling pressure stuck close to 1.2720 level against the US Dollar after falling as low as 1.2666 on Thursday marking fresh 14-month low.

US Dollar pulled back from cyclical highs early on Thursday as the news on the US and China getting back to trade negotiations hit the market with China’s delegation led by a deputy commerce minister visiting Washington DC in late August to discuss “issues of mutual concern.”

The UK total retail sales increased 0.7% over the month in July after slumping unexpectedly in June. Core retail sales stripping the basket off motor fuel sales increased 0.9% m/m. Over the year, total retail sales accelerated to 3.5% y/y in July while core retail sales increased 3.7% y/y.

Although UK retail sales boosted Sterling temporarily it is still trapped in the downward sloping trend channel and as the currency pair broke below 1.2755 representing 100% retracement of the move from 1.2755 to a cyclical high of 1.4377 reached on April 12 this year, the new low of below 1.2666 is the next target.

Technical oscillators on 1-hour chart including Momentum, the Relative Strength Index moved to the neutral territory and wait for the decisive move. The Slow Stochastics though made a bearish crossover in the overbought territory. With the support of solid fundamental, the GBP/USD is prone to move higher with 1.2755 being the immediate resistance on the upside. Break above 1.2755 should see GBP/USD testing 1.2800.

GBP/USD 1-hour chart

Author

Mario Blascak, PhD

Independent Analyst

Dr. Mário Bla&scaron;čák worked in professional finance and banking for 15 years before moving to journalism. While working for Austrian and German banks, he specialized in covering markets and macroeconomics.

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