GBPUSD , H1
UK retail sales data came in much lower than expected in official data for January, with headline readings of 0.1% m/m and 1.6% y/y growth after respective December readings of -1.4% and 1.5%. This was the sixth consecutive decline in food sales, which the ONS stats office has pinned on rising food prices (which in turn stems from sterling’s post-Brexit vote depreciation and consequential rise in food prices). The outlook remains a challenged one for the retail sector, given rising mortgage rates and continued erosion in real incomes. Sterling has tipped lower in the wake of the data miss, with Cable ebbing toward 1.4100.
The Daily technical view supports the positive momentum of the GBPUSD, despite the intra-day weakness seen in Sterling against US Dollar, this morning prior and after the data . The pound is in a continuing what is now a four-day rally versus the dollar, gaining back nearly the 60% of the losses seen since January 25. Hence in the bigger picture the bullish momentum remains for GBPUSD as long as the market keeps trading above the immediate support level at 20-day SMA at 1.4015 level. The next Daily support comes at 1.3950 level.
Regarding the short-term picture, the pair presents bearish momentum. Cable broke the 20-period SMA, and dropped to the lower Bollinger Bands pattern, after 6 negative consecutive hourly sessions. It is currently at 1.4060, from 1.4144 high. Meanwhile, the 20-period SMA has flattened, suggesting that the pair might consolidate for a while today.
However, if the negative momentum continues today and the prices manage to break the 1.4030–1.4050 area which is the confluence of the lower Bollinger Bands pattern, the significant 50% Retracement Fibonacci level since January 25 but also the recent swings lower area, then the pair might be seen reversing to the downside and retesting the 38.2% Fibonacci level, at 1.3980 level. The technical indicator do not seen support yet this scenario, with MACD positive configurating since Wednesday and RSI at neutral confirming a possible consolidation in short term.
Oppositely, if the support area at 1.4030–1.4050, holds, then this negative movement seen today, could be consider as an intra-day correction, before the pair retests again, the 1.4150 level.
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