Throughout the week, the GBPUSD currency pair has navigated a turbulent market landscape, responding to a flurry of economic data releases that have influenced its trajectory. The catalyst for the initial movement was the release of US inflation figures, which exceeded expectations and consequently strengthened the dollar. However, this uptrend was short-lived as subsequent economic releases from both the US and UK offset each other’s impact.
In the US, retail sales figures for the month fell far below the consensus forecast of -0.1%, plummeting to -0.8% from the previous month’s 0.4%. Meanwhile, the UK reported a decline in GDP, with the quarter-on-quarter figure coming in at -0.3% compared to the previous -0.1%, contrary to expectations of no change. Similarly, the year-over-year GDP figure dropped to -0.2% from the previous 0.2%, further deviating from the expected 0.1% decrease.
However, the week’s drama did not end there. On Friday, the UK released its retail sales data, which exceeded expectations and injected fresh optimism into the currency pair. Year-over-year retail sales showed an unexpected increase of 0.7%, contrasting with the previous -2.4% and surpassing the anticipated -1.4%. Similarly, the month-on-month retail sales figure rose significantly to 3.4%, far exceeding the consensus forecast of 1.5% and marking a substantial improvement from the previous -3.3%.
As the week draws to a close, the question on everyone’s mind is whether the bullish momentum triggered by the latest data releases can be sustained. It’s been a week of ups and downs, but the story is far from over, and the currency pair’s future trajectory remains uncertain.
Technical
On the 4H chart, a descending triangle has emerged, with the price action forming three lower highs over recent weeks, suggesting that a bearish breakdown could be on the cards. The crossing of the 50-SMA (blue line) above the 25-SMA (green line) confirms the bearish tilt in the shorter term while offering strong resistance to the upside.
Support at 1.2581 is currently underpinning the price, which has recently tested the dynamic resistance of the triangle. If a breakdown occurs at this level, the price could trickle lower toward the triangle support at 1.2535, where the breakdown becomes possible. If the breakdown occurs, traders could look toward 1.2518 and 1.2505 as potential pivot points for a retracement, while neckline support is established at 1.2478 if the breakdown is sustained.
Conversely, if the bullish momentum pushes above the 25-SMA and 50-SMA, a breakout could occur to the upside of the triangle if the price can clear 1.2608. the Fibonacci midpoint, backed by the 100-SMA (orange line) at 1.2645, could be a level of interest in this case, as a retracement could be initiated here. However, if the bullish momentum continues, the price could test the 61.8% Fibonacci golden ratio at 1.2675.
Summary
It has been an eventful week for the GBPUSD currency pair, headlined by multiple pivotal data releases. However, a descending triangle has formed, opening the potential for a breakdown and a bearish trend formation if the price pulls back below support at 1.2581.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
GBPUSD Rounds Off Busy Week
Throughout the week, the GBPUSD currency pair has navigated a turbulent market landscape, responding to a flurry of economic data releases that have influenced its trajectory. The catalyst for the initial movement was the release of US inflation figures, which exceeded expectations and consequently strengthened the dollar. However, this uptrend was short-lived as subsequent economic releases from both the US and UK offset each other’s impact.
In the US, retail sales figures for the month fell far below the consensus forecast of -0.1%, plummeting to -0.8% from the previous month’s 0.4%. Meanwhile, the UK reported a decline in GDP, with the quarter-on-quarter figure coming in at -0.3% compared to the previous -0.1%, contrary to expectations of no change. Similarly, the year-over-year GDP figure dropped to -0.2% from the previous 0.2%, further deviating from the expected 0.1% decrease.
However, the week’s drama did not end there. On Friday, the UK released its retail sales data, which exceeded expectations and injected fresh optimism into the currency pair. Year-over-year retail sales showed an unexpected increase of 0.7%, contrasting with the previous -2.4% and surpassing the anticipated -1.4%. Similarly, the month-on-month retail sales figure rose significantly to 3.4%, far exceeding the consensus forecast of 1.5% and marking a substantial improvement from the previous -3.3%.
As the week draws to a close, the question on everyone’s mind is whether the bullish momentum triggered by the latest data releases can be sustained. It’s been a week of ups and downs, but the story is far from over, and the currency pair’s future trajectory remains uncertain.
Technical
On the 4H chart, a descending triangle has emerged, with the price action forming three lower highs over recent weeks, suggesting that a bearish breakdown could be on the cards. The crossing of the 50-SMA (blue line) above the 25-SMA (green line) confirms the bearish tilt in the shorter term while offering strong resistance to the upside.
Support at 1.2581 is currently underpinning the price, which has recently tested the dynamic resistance of the triangle. If a breakdown occurs at this level, the price could trickle lower toward the triangle support at 1.2535, where the breakdown becomes possible. If the breakdown occurs, traders could look toward 1.2518 and 1.2505 as potential pivot points for a retracement, while neckline support is established at 1.2478 if the breakdown is sustained.
Conversely, if the bullish momentum pushes above the 25-SMA and 50-SMA, a breakout could occur to the upside of the triangle if the price can clear 1.2608. the Fibonacci midpoint, backed by the 100-SMA (orange line) at 1.2645, could be a level of interest in this case, as a retracement could be initiated here. However, if the bullish momentum continues, the price could test the 61.8% Fibonacci golden ratio at 1.2675.
Summary
It has been an eventful week for the GBPUSD currency pair, headlined by multiple pivotal data releases. However, a descending triangle has formed, opening the potential for a breakdown and a bearish trend formation if the price pulls back below support at 1.2581.
Sources: Koyfin, Tradingview, Reuters
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
