GBP/USD Daily Forecast – British Pound Retreats After Disappointing Retail Sales ReportGBP/USD managed to get below the support at 1.3900 and is moving towards the next support level at 1.3865.
British Pound Remains Under Pressure Against U.S. Dollar
GBP/USD is currently trying to settle below 1.3900 while the U.S. dollar continues to gain ground against a broad basket of currencies.
The U.S. Dollar Index is currently trying to settle above the resistance at 92. In case this attempt is successful, the U.S. Dollar Index will move towards the next resistance level at 92.15 which will be bearish for GBP/USD.
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UK has just reported that Retail Sales declined by 1.4% month-over-month in May compared to analyst consensus which called for growth of 1.6%. On a year-over-year basis, Retail Sales decreased by 2.1%.
Interestingly, U.S. dollar continued to move higher against a broad basket of currencies despite the strong pullback in Treasury yields. The yield of 10-year Treasuries declined towards 1.50% while the yield of 30-year Treasuries decreased to multi-week lows at 2.09%.
At this point, it looks that many foreign exchange market traders were caught in short bets against U.S. dollar when the Fed suddenly changed its tone and revealed that two rate hikes could be possible in 2023. It remains to be seen whether the short squeeze will be continued as the Fed maintained its quantitative easing program and there is no shortage of dollar liquidity.
GBP/USD is currently testing the support level at 1.3900. RSI is close to the oversold territory, but there is plenty of room to gain additional downside momentum in case the right catalysts emerge.
If GBP/USD manages to settle below 1.3900, it will head towards the next support at 1.3865. A successful test fo the support at 1.3865 will open the way to the test of the support at 1.3835. In case GBP/USD declines below this level, it will move towards the support at 1.3800.
On the upside, GBP/USD needs to settle back above the resistance at 1.3900 to have a chance to gain upside momentum in the near term. The next resistance level is located at 1.3920. If GBP/USD manages to settle above this level, it will head towards the resistance at 1.3950.
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