GBP/USD Price Analysis – Aug 18, 2023

Daily Price Outlook

The GBP/USD currency pair stopped its three-day winning trend and is currently around 1.2720 on Friday. This is happening because retail sales data from the UK, showing weaker numbers, has pushed the pair down. Furthermore, there is a caution sentiment due to increased risk aversion, strong US Treasury yields, and ongoing economic issues in China, all of which are putting pressure on GBP/USD.

These factors might make the US Dollar stronger and could affect the direction of the pair. Traders might be more careful after UK inflation numbers, which were released on Wednesday. These numbers have already boosted the pair, and there's worry they might lead the Bank of England (BoE) to consider raising interest rates in their September meeting.

UK Retail Sales Drop More Than Expected, Pressuring GBP/USD

According to the latest data from the Office for National Statistics (ONS), UK Retail Sales took a 1.2% tumble in July compared to the expected decrease of 0.5%. This decline follows a 0.6% growth in the previous month. The Core Retail Sales, which excludes car fuel sales, also saw a drop of 1.4% in July, worse than the anticipated decrease of 0.7%.

On a yearly basis, Retail Sales went down by 3.2% in July, more than the expected 2.1% decrease, while Core Retail Sales fell 3.4%, surpassing the expected 2.2% drop. These disappointing numbers have pushed GBP/USD to test daily lows around 1.2725, trading at 1.2727 with a 0.09% decline for the day.

US Dollar Pulls Back Despite Positive Data; Market Cautious About Inflation Clues

The broad-based US dollar is giving back some of its recent gains. The DXY, which tracks the dollar against major currencies, is hovering around 103.40. However, this retreat comes despite better US data, creating caution in the market as it looks for more clues about inflation. For instance, Initial Jobless Claims for the week ending on August 11 decreased to 239K from the previous 250K, slightly beating the expected 240K. Meanwhile, the Philadelphia Fed Manufacturing Survey for August showed improvement, rising to 12 from the earlier -13.5, higher than the anticipated -10.

Key Data Releases and Jackson Hole Symposium Await in the Upcoming Week

Looking forward to the next week, investors will keep an eye on important data releases in the US and the UK. In the US, Home Sales figures and early S&P Global PMI surveys for August will be in focus. Similarly, the UK will release its PMI survey and GfK Consumer Confidence data for August. These numbers will give us a clearer picture of how both economies are doing and could influence decisions about trading the GBP/USD pair.

GBP/USD - Technical analysis

The GBP/USD pair has successfully breached the resistance line of the bearish channel and established itself above it, signaling an attempt to achieve intraday gains. However, it's noteworthy that the stochastic indicator has shifted from positive momentum to a negative overlap, indicating the potential for a resumption of the corrective bearish trend. This trend is directed towards the 1.2625 region as the next key target.

As a result, it is anticipated that the upcoming trading sessions may witness downward movement. To facilitate progress towards the aforementioned target, a breakthrough of the 1.2725 level is crucial. Conversely, surpassing the 1.2825 threshold would halt the negative projection and prompt a reversal towards higher levels.

The projected trading range for today is expected to be positioned between the support at 1.2660 and the resistance at 1.2825.