- GBP/USD flirts with three-week-old support line after declining in the last five consecutive day.
- Broad US Dollar strength weighs on Cable price ahead of UK Retail Sales for June.
- Downbeat UK data, cautious markets weigh on Pound Sterling.
- GBP/USD buyers need validation from weekly resistance line; MACD signals hint at further downside.
GBP/USD licks its wounds around 1.2870 amid Friday’s sluggish start to the Asian session, after declining in the last five consecutive days to refresh a two-week low. In doing so, the Cable pair portrays the typical pre-data consolidation as the market awaits the UK Retail Sales for June.
US Dollar Index (DXY) cheered upbeat US data and a rebound in the yields to jump the most in two months and exerted downside pressure on the Pound Sterling price the previous day. That said, US Initial Jobless Claims dropped to 228K for the week ended on July 14, the lowest since May, versus 237K prior and 242K market forecasts but the Continuing Jobless Claims rose to 1.754M for the said period compared to market forecasts of reprinting 1.729M figures. Additionally, the Philadelphia Fed Manufacturing Survey gauge improved to -13.5 for July from -13.7 prior, versus -10 expected while Existing Home Sales slumped -3.3% MoM in June compared to 0.2% prior gain.
Earlier in the week, US Building Permits and Housing Stars also reported downbeat figures for June whereas the Retail Sales growth eased despite posting upbeat details of Retail Sales Control Group for June. Despite the recently upbeat US employment clues, the US statistics haven’t been impressive to support the Fed in announcing more rate hikes past July in the next week, which in turn can challenge the US Dollar bulls. The same, if backed by upbeat UK Retail Sales, expected 0.2% versus 0.3% prior, may help the GBP/USD to extend the latest corrective bounce.
It should be noted that the recently released downbeat UK GfK Consumer Confidence for July, -30.0 from -24.0, prod the GBP/USD rebound. Furthermore, chatters that the UK PM Rishi Sunak is up for holding general elections in November 2024 also challenge the Cable pair’s corrective bounce.
Additionally, the looming fears about the UK’s economic slowdown seem to keep the GBP/USD buyers hopeful ahead of the key British data contributing majorly to the Gross Domestic Product (GDP).
Technical analysis
Technically, the strongest bearish MACD signals in 12 days join the steady RSI (14) line to suggest further declines of the GBP/USD pair, especially when it reverses from the multi-month top marked in the last week.
However, a three-week-old ascending support line and the 21-SMA can challenge the Cable pair sellers around 1.2850-40.
Following that, a convergence of the 50-SMA and an upward-sloping trend line from March, close to 1.2660-55 at the latest, will be crucial to break for the Pound Sterling bears for conviction.
On the flip side, GBP/USD recovery remains elusive unless the quote remains below the one-week-old descending resistance line, near 1.2990 by the press time. Also important to watch will be the pair’s ability to cross the 1.3000, as well as the latest peak surrounding 1.3145.
In a case where the Cable pair remains firmer past 1.3145, also cross the 1.3150 round figure backed by upbeat UK Retail Sales data for June, the buyers can aim for a March 2022 high of near 1.3300.
GBP/USD: Daily chart
Trend: Limited downside expected
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