GBP/USD Rate, Charts and Analysis:
Trade Smart – Subscribe to the DailyFX newsletter
Receive timely and compelling market commentary from the DailyFX team
Subscribe to the newsletter
Read more: Gold Price Forecast: The $1950 level holds the key to the bearish momentum to continue
UK posted a sharp rise in inflation this week with a hawkish repricing of peak rate odds the Bank of England (BoE) is unable to stem cable slides as the US dollar continues to strengthen. GBPUSD enjoyed a nice bounce in the Asian session from lows around 1.2300 and is currently trading at 1.2340. Just like the rest of the week, the question remains whether the cable can hold on to its gains as the day progresses.
UK retail sales
The UK released retail sales data this morning for April which validated ONS claims that bad retail sales in March were due to heavy rain. The figure for April came in at 0.5%, rebounding from a decline of 1.2% in March with signs that UK retailers may be looking ahead with a little more confidence. Sales volumes increased by 0.8% in the three months through April 2023, the highest rate in August 2021 which came in at 1.3%.
source: ONS, Retail Sales, Great Britain: April 2023
*Note: The above graph shows contributions to the 0.5% monthly increase in total retail sales volume (quantity purchased) in April 2023.
American factors and event risk
Meanwhile, the US dollar, which has been largely the driving force behind Cable’s move, continues to hold steady, which should continue as long as the deal on the US debt ceiling remains unresolved. There were some positive statements but nothing to suggest a deal is imminent as next week will be key with the June 1 deadline approaching.
The coming day will see the focus shift to the all-important core PCE data from the US, which remains the Fed’s preferred measure of inflation. This comes on the back of largely positive data from the US yesterday where estimates for quarterly GDP growth beat expectations while initial and continuing jobless claims also beat estimates. Another positive point for the US on the labor front heading into the June meeting.
Today’s PCE data could provide further support for the USD if the reading comes out hotter than expected with the core PCE expected at 4.6%. Exceeding expectations may support recent upbeat statements from federal policymakers on potential increases in June and beyond.
For all the economic data and events that move the market, see DailyFX calendar
Technical outlook and final thoughts
on the daily timeframe GBP/USD It continued falling towards the main 100 day moving average which is resting around the 1.2280 handle. This morning’s bounce came as the pair entered the oversold zone (14-day RSI), peaking at 1.2354.
Given GBPUSD’s daily potential, the biggest concern remains the aforementioned US factors that may continue to limit any bullish recovery. I think we could find significant support and a potential bottom around the 100-day EMA, but that depends on the outcome of the PCE data. The range between 1.2360 and 1.2280 (100-day moving average) could remain pivotal for intraday movements.
There is a possibility that we will see a continuous recovery for most of the European session towards yesterday’s high around 1.2388 before selling operations that pay attention to the American trading session and the release of data.
Key intraday levels to watch out for
resistance levels:
Key support levels:
- 1.2310
- 1.2280 (100-day moving average)
- 1.2220
GBP/USD Daily chart – May 26, 2023
Source: TradingView
Introduction to technical analysis
Relative Strength Index (RSI)
Recommended by Zain Fouda
Written by: Zain Fouda, Markets Writer DailyFX.com
Connect with Zain and follow her on Twitter: @employee