UK retail sales in May fell, with a reading of -0.5%. This was in-line with expectation. April’s reading was revised down from 1.3% to 1.0%. The poor retail sales in May was due to weaker demand in food stores. The thing is, food sales surged in April, so to slide from that is not a big deal, and allows the market to focus on the BoE’s rate hike outlook.
Carney and the bank has recently hinted that a rate hike could come in 2014. At least, that’s what the bank wants the market to think and anticipate. The the BoE minutes revealed that it was “surprised” that the market was not pricing in a 2014 rate hike. So whether the bank will actually raise rates in 2014 or not, it at least wants the market to price that in.
So, despite the poor retail sales data, GBP/USD surged today pricing in the hawkish BoE stance and pushing to a new high on the year above the recent 1.7010 consolidation resistance.
(gbpusd 4h chart, 6/19)
As price approaches 1.7040, it will be testing the 2009-high. We should expect some resistance and choppiness here, especially when the weekly, daily and 4H RSIs are both around 70.
(gbpusd weekly chart, 6/19)
The weekly chart shows that above 1.7040, the next levels to monitor for resistance/targets are the 50% retracement at 1.7337, up to the 1.7443 former support pivot.
Unless the FOMC starts talking early 2015, late 2014 rate hike, GBP/USD looks poised to break above 1.7040 and expose price levels not seen since 2008.
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