GBP/USD Daily Forecast – Trades Flat Following Retail Sales Miss

The British pound continues to trade within a narrow range against the dollar but trades near a fairly important resistance area.
Jignesh Davda

GBP/USD Range Persists

After an early week jump in the GBP/USD exchange rate, the pair has fallen into a range below notable resistance. There are several risk events in the session ahead and there is some potential for a technical break.

GBP/USD attempted to rally higher early in the session but fell under a bit of pressure after retail sales figures out of the UK fell short of expectations. Sales were reported to decline 0.1% in October against expectations for a rise of 0.2%.

Later in the session, the latest producer price index figures from the US will be released. As well, Fed Chair will testify for a second time in from of Congress and several Fed members are scheduled to speak. Considering the busy economic calendar, we could see some movement in the exchange rate today.

Technical Analysis

The rally in GBP/USD has been capped by a fairly notable resistance confluence. The 50 and 100 moving averages on a 4-hour chart are in play and on a daily chart, the 20 moving average offers resistance.

GBPUSD 4-Hour Chart

Further, a potential flag pattern has materialized with the upper bound of the pattern lining up with the mentioned moving averages.

The pound to dollar exchange rate has been moving sideways for the past two sessions. I don’t think it offers a clear signal at this point. While the resistance is important, it is also worth noting that there has been a general lack of selling from it.

If we do manage to break higher from here, I see a further hurdle at around 1.2880 as this is the area that capped the rally on Monday. Beyond that, there is also resistance just above 1.2900 from a declining trendline that is drawn from the October high. In this context, the pair has quite a bit to go to confirm it is still trading within an uptrend.

On a 4-hour chart, the pair is on pace to post a bullish engulfing candle. This is despite the weak UK retail sales print. A break below the candle low, around 1.2828 would tend to negate the short-term upward momentum.

Bottom Line

  • GBP/USD remains within a range but is showing short-term upward momentum.
  • There is a significant resistance confluence in play around 1.2860. This area is currently holding the pair lower.
  • A break above 1.2880 could be signal a bullish continuation from the leg up we saw early in the week.
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