GBP/USD: On the defensive despite strong UK retail sales
- GBP/USD fell below 1.30 yesterday despite the big beat on the UK retail sales.
- US retail sales also bettered estimates, sending the dollar higher against most majors.
- Sterling could be headed lower to 1.29, having created another bearish lower high last week.
The path of least resistance for the GBP/USD appears to be on the downside.
The British Pound slipped below 1.30 and closed under the April 5 low of 1.2987 yesterday, validating the bearish lower high of 1.3133 created last Friday. Notably, that is the third bearish lower in the last four weeks.
The bearish move happened despite the upbeat UK data - consumer spending, as represented by retail sales, rose 1.1 percent in March, smashing expectations of a negative print.
While Sterling failed to pick up a strong bid, the greenback found takers on the back of upbeat US retail sales report. Consumer spending rose 1.6% in March, the strongest pace of growth since September 2017, beating the consensus forecast was for a 1% rise. The previous month's print was also revised higher.
As a result, cable suffered a bearish close below 1.2987. Sterling's inability to cheer strong UK data, coupled with the bearish close below 1.30 indicates scope for a deeper drop to 1.29 - the lower edge of the falling wedge pattern seen on the daily chart. The drop will likely happen in the first half of the next week and the will likely trade comatose today as major FX trading hubs are closed on account of Good Friday holiday.
The outlook would turn bullish if the falling wedge is breached to the higher side. As of writing, the pair is trading at1.2990, representing marginal gains on the day, while the falling wedge resistance is seen at 1.3080.
Technical Levels
Author
Omkar Godbole
FXStreet Contributor
Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.
