GBP/USD Daily Forecast – British Pound Failed To Develop Upside Momentum

GBP/USD Video 17.06.20.

Strong Retail Sales Boosted U.S. Dollar

GBP/USD returned back into the trading range between 1.2250 and 1.2650 after an unsuccessful attempt to settle above the resistance at 1.2650.

The U.S. dollar received material support after the release of the U.S. Retail Sales report which showed that Retail Sales increased by 17.7% month-over-month in May.

This report was much better than analysts’ expectations which called for growth of 8%. Most likely, the direct economic aid and delayed demand contributed to the strength of Retail Sales.

The UK has just provided inflation data for May. Inflation Rate was 0.5% year-over-year and 0% month-over-month. Core Inflation Rate was 1.2% year-over-year and 0% month-over-month.

While the Inflation Rate was fully in line with analyst consensus, Core Inflation Rate was a bit softer than expected. This is not surprising since the consequences of the coronavirus crisis continue to put pressure on economic activity and spending.

Tomorrow, the Bank of England will announce its interest rate decision. While the interest rate is expected to stay unchanged, traders will focus on the size of the quantitative easing program which is projected to increase from 645 billion pounds to 745 billion pounds.

The number of coronavirus cases continues to rise rapidly in some parts of the world, including some U.S. states, so worries about the second wave of the virus could impact the dynamics of GBP/USD.

At this point, U.S. Dollar Index has settled near the 97 level, and the continuation of its rebound will be bearish for GBP/USD.

Technical Analysis

GBP/USD failed to settle above the resistance level at 1.2650 and fell closer to the first support level at the 20 EMA at 1.2535. In case GBP/USD moves below the 20 EMA, it will likely gain additional downside momentum and head towards the next support level at the 50 EMA at 1.2470.

On the upside, GBP/USD will need to settle above the major resistance level at 1.2650 to continue the upside move. If this happens, GBP/USD will head towards the test of the next resistance level at 1.2750.

From a big picture point of view, GBP/USD is still in the trading range between 1.2250 and 1.2650. Most likely, GBP/USD will need very strong catalysts to get out of this range.

For a look at all of today’s economic events, check out our economic calendar.