Bearish View
- Sell the GBP/USD pair and set a take-profit at 1.3420.
- Add a stop-loss at 1.3650.
- Timeline: 1-2 days.
Bullish View
- Set a buy-stop at 1.3580 and a take-profit at 1.3650.
- Add a stop-loss at 1.3500.
The GBP/USD pair downward trend continued on Monday as investors reacted to the overall risk-off sentiment and the weak UK retail sales data. The pair is trading at 1.3555, which is about 1.45% below the highest level this month.
UK Retail Sales Data
Last week, the UK published mixed economic data last week. On Tuesday, the UK published strong jobs data. The numbers showed that the country’s unemployment rate declined to 4.1% in November as the recovery continued.
On Wednesday, the Office of National Statistics (ONS) revealed that the country’s inflation continued rising in December. The headline consumer inflation rose to 5.2% in December while the core CPI retreated slightly.
However, on Friday, the UK published weak retail sales data. The numbers showed that the country’s retail sales declined sharply in December as Christmas spending cooled. Retail sales declined by 3.7% between November and December.
That decline was significantly lower than the median estimate of a 0.6% increase in December. This decline was mostly because of non-food sales that declined to about 7.1% in December. Still, analysts expect that the Bank of England (BOE) will continue hiking interest rates this year.
The next key catalyst for the GBP/USD will be the latest manufacturing and services PMI data from the United States and the UK. Analysts expect the data to show that the UK manufacturing and services PMI in December. Markit will also publish relatively strong PMI data. Still, these numbers will likely not have an impact on the GBP/USD pair.
The pair will then react to the latest consumer confidence data, which will come out on Tuesday. Economists expect the data to show that consumer confidence declined from 115.8 in December to 111.8.
GBP/USD Forecast
The GBP/USD pair declined to a low of 1.3555, which is about 1.45% from its highest level this month. It has moved below the 61.8% Fibonacci retracement level. The pair has also moved below the 25-day and 50-day moving averages. The two lines have made a bearish crossover, which is a bearish sign. The MACD has also been in a strong bearish trend.
Therefore, the pair will likely drop to the 38.2% Fibonacci retracement level. Therefore, this drop will be invalidated if it moves above 1.3600.
