GBP/USD set to test 1.30 once more as traders brace for disappointing UK Retail Sales

The GBP/USD is trading into 1.3080 heading into Thursday's London session after a mild rebound from Wednesday's lows when short-sellers challenged the 1.3000 major handle after inflation numbers for the UK's economy failed to meet market expectations.

The Sterling continued the week's bearish action yesterday, declining from the day's high of 1.3116, and extending the slide from the weekly high of 1.3292 to run into support from 1.3008. The GBP/USD's recovery has been half-hearted, only managing to lift some 75 pips from a nine-month bottom.

Inflation expectations for the UK were broadly missed on Wednesday, with the y/y June Consumer Price Index (CPI) printing at 2.4%, remaining steady with the previous reading and missing the broader market's forecast for an uptick to 2.6%. Core y/y CPI for June also missed, dropping to 1.9% versus the previous period's 2.1%, and broadly missing the expected increase to 2.2%. 

Thursday will be bringing Retail Sales numbers to the Sterling trading market at 08:30 GMT, and bears can be expected to remain in control, with the m/m June Retail Sales indicator forecast to clock in at just 0.4%, compared to the previous month's 1.3%. The y/y Retail Sales for June are expected to remain flat at 3.9%, and the monthly Core Retail Sales (excluding fuels) for June is also expected to decline, with traders calling for a slide from 1.3% to 0.3%.

GBP/USD Levels to watch

With softness being built into the GBP thanks to a steady stream of Brexit headlines indicating the UK government continues to squabble amongst themselves, rendering successful negotiations with the EU next to impossible, and declining economic figures further hampering the Pound's medium-term outlook, and the 1.3000 major handle is the last remaining support preventing further downside, and as FXStreet's Chief Analyst Valeria Bednarik noted, "the 4 hours chart for the pair shows that it's currently oversold, with the Momentum maintaining its bearish strength but the RSI aiming to recover ground at 32, anyway indicating that selling interest remains strong. The 20 SMA in the mentioned chart gains downward strength well above the current level, and below an also bearish 200 EMA, which also favor the downside. The 1.3000 level is a major psychological support and won't be easy to break, yet if it finally gives up,  the pair could easily lose another 100 pips."

Support levels: 1.3035 1.3000 1.2970

Resistance levels: 1.3080 1.3120 1.3155