GBP/USD: Fed-BOE divergence hurts, eyes UK retail sales

Corrective rallies remain elusive as monetary policy divergence favors the USD.
Dismal UK retail sales print could push Sterling lower.

Omkar Godbole FXStreet Contributor

The GBP/USD has been oversold for three weeks now, according to the 14-day relative strength index (RSI), still the corrective rally remains elusive.

The situation is unlikely to improve significantly in the near-term, courtesy of the policy divergence between the Federal Reserve and the Bank of England (BOE).

The Fed is expected to hike rates in June and many believe it will hike rates by four times this year. Meanwhile, the markets are pricing-in a one-in-three chance of the BoE raising borrowing costs in August, down from 50/50 earlier this week. Thus, the corrective rally remains elusive despite oversold conditions.

The monetary policy divergence will likely widen further in a GBP-negative manner if the UK retail sales, scheduled for release at 8:30 GMT, miss estimates.

Meanwhile, an above-forecast reading might put a bid under the oversold Sterling, although a sustained rally would require BOE to adopt a hawkish stance.

GBP/USD Technical Levels

As of writing, the currency pair is trading at 1.3360. The immediate resistance is seen at 1.3402 (5-day MA), 1.3460 (10-day MA) and 1.35 (psychological hurdle). Meanwhile, support is seen at 1.3305 (previous day's low), 1.3268 (August 3 high), and 1.3221 (Nov. 25 low).

	TREND INDEX	OB/OS INDEX	VOLATILY INDEX
15M	Bearish	Neutral	Low
1H	Bullish	Neutral	Low
4H	Bearish	Neutral	High
1D	Bearish	Oversold	Low
1W	Bearish	Oversold	Low
Updated May 24, 03:45 GMT

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

AUD/USD keeps range near 0.6950 after Australian trade data

AUD/USD consolidates near a two-month low, trading around mid-0.6900s in the Asian session on Thursday amid a bullish US Dollar. The US PCE data tempered October Fed hike bets, though oil-driven inflation fears remain supportive of elevated US bond yields. Meanwhile, Australia's trade surplus shrank sharply in August to AUD495M, having limited impact on the Aussie Dollar and the pair.

USD/JPY sits at weekly top above 158.00 as bullish USD counters intervention risks

USD/JPY is sitting at the top end of its weekly range above 158.00 in the Asian session on Thursday. Despite the softer US PCE data, oil-driven inflation risks keep US bond yields elevated near multi-year highs. Moreover, the US-Iran standoff benefits the safe-haven US Dollar and supports the pair. Broad US Dollar strength counters hawkish BoJ expectations and Japanese intervention risks.

Gold alternates gains with losses below $4,200

Gold trades without a clear direction on Thursday, always below the key $4,200 mark per troy ounce. The yellow metal’s vacillating price action comes amid the marked advance in the US Dollar coupled with steady effervescence in the Middle East conflict.

Crypto Today: Bitcoin, Ethereum, XRP struggle to regain momentum amid returning ETF outflows

Bitcoin trades broadly between support at $82,500 and resistance at $85,000. Ethereum similarly remains under pressure, trading below $2,700 while the $2,600 level provides immediate support. At the same time, Ripple has slipped below the pivotal $1.50 level.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Fed. Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario.

Markets are pricing a Fed pause. The jobs data says the hike is still coming

The market has rapidly changed its mind about the Federal Reserve (Fed). Only a week ago, investors saw an October interest-rate hike as the most likely outcome. However, softer inflation and cautious comments from policymakers have since turned a pause into the dominant scenario. Yet beneath that dramatic repricing, the US economy is sending a considerably less dovish message.