GBP/USD Relatively Unchanged After 5.1% Drop in March UK Retail Sales

Retail sales in the UK were weighed by a sharp drop in clothing store sales while food stores and non-store retailing showed some growth. Month over month sales were reported to decline 5.1%. GBP/USD reached lows near 1.2300 following the report but the drop was short-lived as buyers stepped in to lift the pair higher to fully erase losses for the day.

The turn higher in the pound to dollar exchange rate coincided with a test of important resistance in the dollar index (DXY) today. DXY reached a high of 100.87 in the early day which is roughly the area where the index peaked earlier in the month. Since then, the index has declined into negative territory for the day thus far.

Later today, the US will release its latest durable goods orders figures which could accompany a volatile reaction among the dollar pairs. Analysts are forecasting a staggering 12% drop in orders for March.

Yesterday’s US unemployment claims report revealed another 4.4 million workers filing for benefits. In total, the past five reports have indicated that more than 26 million jobs have been lost in the US.

Technical Analysis

After rising every day in the week thus far, the US dollar is paring back gains ahead of the US open today. This is underpinning GBP/USD although a weaker US durable goods orders report could shift sentiment once again.

Yesterday, GBP/USD spiked above 1.2370 resistance although the rally was short-lived. The same level is seen as strong upside resistance in the session ahead.

Yesterday’s price action signals strong selling pressure and that the pair may have turned lower once again although GBP/USD bears will want to see the pair hold below 1.2369 over the next few sessions.

Near-term support remains at today’s low near 1.2300. Beyond that, further support is seen at 1.2250 which held the pair higher earlier this week.

The weekly close will be important. If the pair closes anywhere near today’s lows, it would set up a bearish pattern on a weekly chart which could set the tone for next week.

Bottom Line

• GBP/USD has wiped out an early day decline on the back of a weak UK retail sales report as the dollar has pared back gains after rising every day this week.
• US durable goods orders will be released next. A volatile reaction might accompany the report if it deviates significantly from the analyst estimate.