GBP/USD and a Return to $1.19 in the Hands of UK Stats and the BoE

It is a busy day for the GBP/USD, with UK retail sales figures for October in the spotlight. Following the disappointing numbers for September, economists forecast a 0.3% increase in retail sales in October. However, year-over-year, economists forecast retail sales to fall by 6.5% versus 6.9% in September.

Weak numbers would place the GBP/USD under more intense selling pressure after Thursday’s Autumn Statement-driven pullback.

Today’s numbers will need to impress to offset the effects of the OBR’s economic growth forecasts for 2023. High inflation and the Bank of England’s mandate suggest more rate hikes to come that would place the UK economy under more pressure.

In the wake of the Autumn Statement, the Bank of England is back in focus today. Monetary Policy Committee member Jonathan Haskel will also speak. References to Thursday’s Autumn Statement, OBR projections, and monetary policy would influence the Pound.

GBP/USD Price Action

At the time of writing, the Pound was up 0.02% to $1.18641. A mixed start to the day saw the GBP/USD fall to a low of $1.18578 before recovering.

Technical Indicators

The Pound needs to avoid the $1.1861 pivot to target the First Major Resistance Level (R1) at $1.1959. Hawkish MPC member chatter and better-than-expected retail sales figures would support a return to $1.19.

In the case of an extended rally, the GBP/USD would likely take a run at $1.20 but fall short of the Second Major Resistance Level (R2) at $1.2056. The Third Major Resistance Level (R3) sits at $1.2251.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1763 into play. However, barring a UK data-fueled sell-off, the Pound would likely avoid sub-$1.17 and the Second Major Support Level (S2) at $1.1665. Thursday’s Autumn Statement and OBR growth forecasts remain bearish for the GBP/USD.

The Third Major Support Level (S3) sits at $1.1470.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.17244. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.1763) and the 50-day EMA ($1.17244) would support a breakout from R1 ($1.1959) to target $1.20. However, a fall through S1 ($1.1763) and the 50-day EMA ($1.17244) would see the GBP/USD test buyers at $1.17. The 200-day EMA sits at $1.15047.

The US Session

It is a quiet day ahead on the US economic calendar, with existing home sales the key stat of the day. However, the numbers are unlikely to influence market risk sentiment.

Following hawkish Fed chatter on Thursday, uncertainty over a December Fed pivot could deliver further dollar support.

The probability of a 75-basis point December rate hike had fallen to 14.6% before FOMC member Bullard’s comments on Thursday. This morning, the likelihood of a 75-basis point rate hike stood at 21.8%, despite the disappointing Philly Fed Manufacturing numbers.

While the US economic calendar shows no FOMC members speaking today, comments to the media need consideration. US unemployment and inflation support further front-loading. Hawkish Fed chatter would place further pressure on the GBP/USD.