GBP/USD fell below 1.66 during the 8/20 session and found support at 1.6563 at the start of the 8/21 session. As we got into the 8/21 European session, price was pulling back up toward the 1.66 handle. However, after the release of UK retail sales data for July, we saw the brief rally cut short.
UK Retail Sales (m/m) July: 0.1%, Forecast: 0.4%, June: 0.2%
Despite prices falling at their fastest pace in almost 5 years, consumers are not spending as much as economists are projecting. On the year, retail sales growth dropped to 2.6%, which is the weakest annual pace since Nov. 2013.
GBP/USD just can’t catch a break. The first fundamental release for the UK was the soft inflation data on 8/19. Then during the 8/20 session we saw a relatively hawkish BoE minutes help GBP/USD find support, but that was brief. The hawkish FOMC minutes fueled the USD across the board, and cable was no exception as it fell below 1.66. Now, poor retail sales data might keep it below 1.66.
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From a technical perspective, GBP/USD is in a persistent bearish trend since mid-July when it retreated from 1.7191. The fundamental factors this week are supportive of a bearish GBP/USD. A break above 1.66 could signal some further near-term correction, but look for sellers at the 1.6625 support/resistance pivot, especially if the 1H RSI approaches 60. There is no reason to believe the trend will buck just yet. There is still at least some short-term downside risk toward the 1.6551 support pivot from April, and possibly the 1.6465 support pivot from March.
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The daily chart shows that GBP/USD took another step in the bearish scenario as it broke below the 200-day SMA. At this point, a break above 1.67 would be needed to signal a consolidation/bullish correction of any importance. So far, there has NOT been any.
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