GBP/USD Eyes Sub-$1.1850 on Retail Sales as the EUR Heads for Parity

It was a busy morning for Pound. UK retail sales figures drew plenty of interest going into the European open. With inflation hitting double digits, the numbers raised yet more red flags over the UK economy.

According to the Office for National Statistics, retail sales rose by 0.3% in July to avoid a third consecutive monthly fall. Economists forecast a 0.2% decline. Core retail sales increased by 0.4% versus a 0.2% increase in June.

The numbers were better than forecasts, though with inflation hitting double digits, concerns over the outlook for consumption overshadowed the numbers.

While the UK economic calendar is on the busier side, there are no scheduled Monetary Policy Committee member speeches to provide direction. However, following today’s numbers, MPC member chatter leaves the Pound exposed to any unscheduled MPC member comments to the media.

For the EUR, it is a quiet day ahead, with no economic indicators from the Eurozone for the markets to consider. The lack of stats will leave the EUR in the hands of market risk sentiment and any ECB member chatter.

GBP/USD Price Action

At the time of writing, the Pound was down 0.10% to $1.19140.

In response to the retail sales figures, the Pound rose to a post-stat high of $1.19249 before falling to a low of $1.18992.

Technical Indicators

The Pound needs to move through the $1.1976 pivot to target the First Major Resistance Level (R1) at $1.2030 and the Thursday high of $1.20797.

However, following today’s retail sales figures, the GBP/USD pair would need a sharp pickup in risk appetite to support a return to $1.20.

In the event of an extended rally, the GBP/USD pair could test resistance at $1.21 but fall short of the Second Major Resistance Level (R2) at $1.2133.

The Third Major Resistance Level (R3) sits at $1.2290.

Failure to move through the pivot would see the Pound test the First Major Support Level (S1) at $1.1873 and support at $1.1850.

In case of an extended sell-off fueled by risk aversion, the GBP/USD pair could test the Second Major Support Level (S2) at $1.1820 and support at $1.18.

The Third Major Support Level (S3) sits at $1.1663.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.20662.

Following Thursday’s bearish cross, the 50-day pulled back from the 100-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals. A further 50-day EMA pullback from the 100-day EMA would leave support levels in play.

However, a GBP/USD move through R1 (1.2030) would bring the 50-day EMA ($1.20661) and the 100-day EMA (1.20839) into play.

EUR/USD Price Action

At the time of writing, the EUR was up 0.04% to $1.00891.

Technical Indicators

The EUR/USD needs to move through the $1.0119 pivot to target the First Major Resistance Level (R1) at $1.0159 and the Thursday high of $1.0193.

A pickup in appetite for riskier assets would support a return to $1.0150.

In the event of an extended rally, the EUR/USD pair could test resistance at $1.02 but fall short of the Second Major Resistance Level (R2) at $1.0233.

The Third Major Resistance Level (R3) sits at $0.9892.

Failure to move through the pivot would see the EUR/USD test the First Major Support Level (S1) at $1.0045.

In case of an extended sell-off, fueled by risk aversion, the EUR/USD pair could test the Second Major Support Level (S2) at $1.0005 and support at $1.0000.

The Third Major Support Level (S3) sits at $0.9892.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. Following Wednesday’s bearish cross, the EUR/USD sits below the 50-day EMA, currently at $1.01828. The 50-day and the 100-day EMAs pulled back from the 200-day EMA, delivering bearish signals.

A move through R1 ($1.0159) and a breakout from the 50-day EMA ($1.01828) and the 100-day EMA (1.01992) would support a run at R2 ($1.0233).

However, a further pullback from the 50-day EMA would leave the Major Support Levels in play.

The US Session

It is a quiet day ahead on the US economic calendar, with no US indicators for the markets to consider. The lack of stats will leave the Dollar in the hands of FOMC member chatter and market risk sentiment.

Following the Dollar Spot Index return to 107, the bulls will target 110.