GBP to USD Forecasts: $1.31 Hinged on UK Retail Sales Numbers

Highlights

• The GBP to USD had a bullish start to the Thursday session, with the bulls eying a return to $1.30.
• UK retail sales will be in focus later this morning, with the BoE eying consumption trends.
• Later today, there are no US economic indicators to consider, leaving sentiment toward BoE monetary policy and the UK economy to influence.

It is a busy day ahead for the GBP to USD. UK retail sales figures will move the dial early in the European session.

Until now, the UK economy has remained resilient despite elevated inflation and Bank of England monetary policy moves to tame inflation. While inflationary pressures eased in June, wage growth remains elevated. A sharp rise in consumption would fuel inflationary pressures and force the Bank of England to take more aggressive steps to curb demand.

Economists forecast UK retail sales to increase by 0.2% in June. In May, retail sales rose by 0.3%. Compared with June 2022, economists expect retail sales to fall by 1.5% versus a 2.1% decline in May.

With retail sales numbers in focus, investors should monitor Bank of England chatter. However, no Monetary Policy Committee members are on the calendar to speak today, leaving comments to the media to influence.

Earlier this morning, the GfK Consumer Climate numbers failed to move the dial. The GfK Consumer Climate Index fell from -24 to -30 in July, with inflation, interest rates, and economic uncertainty weighing on sentiment.

The US Session

It is a quiet day ahead on the US economic calendar. There are no US economic indicators to move the dial later in the day. The lack of stats will leave the GBP/USD in the hands of market risk sentiment and sentiment toward the respective economies and monetary policy outlooks.

GBP to USD Price Action

Daily Chart

The Daily Chart showed the GBP to USD sat below the $1.30 psychological resistance level. Looking at the EMAs, the GBP to USD remained above the 50-day ($1.27139) and 200-day ($1.24051) EMAs, signaling bullish momentum over the near and long term.

Notably, the 50-day EMA continued to pull away from the 200-day EMA and reflected a bullish trend.

Looking at the 14-Daily RSI, the 53.94 reading sent moderately bullish price signals, which aligned with the 50-day and 200-day EMAs. A GBP to USD return to $1.30 would give the bulls a run at $1.31 to bring the lower level of the $1.3195 – $1.3255 resistance band into view. The GBP to USD would need to avoid a fall through the $1.2862 – $1.2785 support band to support a bullish session.

A fall through the $1.2862 – $1.2785 support band would bring the 50-day EMA ($1.27139) into view.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD sits below the $1.30 psychological resistance level. After the bearish Thursday session, the GBP to USD recovered to sit above the $1.2862 – $1.2785 support band.

However, the GBP to USD remains below the 50-day EMA ($1.29514) while holding above the 200-day EMA ($1.27818), sending bearish near-term but bullish longer-term signals. Significantly, the 50-day EMA narrowed on the 200-day EMA, signaling a fall through the $1.2862 – $1.2785 support band.

However, a GBP to USD move through the 50-day EMA ($1.29514) would give the bulls a run at $1.31.

The 14-4H RSI reading of 32.45 sent bearish signals, with selling pressure outweighing buying pressure. Significantly, the RSI aligns with the 50-day EMA, signaling a fall through the $1.2862 – $1.2785 support band.