Forex Opinion & Analysis

Pound Sterling Declines Despite Upbeat U.K. Data

The pound sterling’s trajectory surprised market participants, especially given upbeat Friday’s macroeconomic statistics. Retail sales jumped to 4.7% from the previous level of 1.5%, significantly exceeding preliminary estimates.

Notably, this was a yearly increase. On a monthly basis, the indicator rose to 1.4% versus the forecast figure of 1.0%. The British currency slightly grew following this data. However, before the opening of the US session, its trajectory changed quite unexpectedly.

At first, the price held its growth. Shortly after, it began to decline. The pound sterling dropped even more after some time. The downward movement was relatively strong. So, there were no reversals.UK retail sales data.

Nobody expected a decline in the pound sterling, especially after such a favorable report. The US also did not unveil any economic data that might overshadow the UK retail sales report. Perhaps, traders have finally collected their thoughts after several meetings of central banks.

They estimated the decisions taken by policymakers and their plans for the coming year. As a result, they saw that the US dollar is highly likely to benefit the most from the discrepancy in key rates. So, after Friday’s fall, the pound sterling returned to levels where it was trading before the FOMC meeting. It lost all gains it won following the BoE and the ECB meetings.

The pound sterling has dipped to its previous levels, so it may either fall or rise. However, bear in mind that this is the pre-Christmas week. Market activity will steadily decline. The macroeconomic calendar will be uneventful today and in the following days. Therefore, analysts expect a thin market.

Technical View

The GBP/USD pair was quite volatile amid the release of crucial macroeconomic reports. It advanced by 150 pips following its publication but dropped to its previous levels. As a result, it again returned to its narrow range of 1.3170/1.3290.

On the 4H chart, the RSI indicator has entered the overbought zone for the first time since October. The price gets stuck in this range, but there is a high probability of a rebound. The indicator is moving below the midline, signaling a trend reversal.

The quotes have again entered the narrow range. So, the pair may again start moving sideways. If this scenario comes true, it may lead to prolonged stagnation until the end of the outgoing year. Alternatively, the outlook will be different if trading activity remains high. In this case, the price is likely to escape the narrow range.

Due to the strong downward movement, complex indicator analysis gives a sell signal on the short-term and intraday charts. Technical indicators signal short positions in the medium term amid the ongoing downtrend.GBP/USD 4-hour chart.

InstaForex Group


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