GBP/USD Forecast: Dismal December Retail Sales Leads Cable Lower

Disappointing December Retail Sales Data

Retail sales volumes have fallen 1% from November, indicating a challenging environment for consumers amid the ongoing cost of living squeeze. The monthly data declined in terms of value spent (value is an indication of price rises) as well as quantity bought. Longer term trends reveal that value spent is considerably higher while volumes purchased decline – which is consistent with the current inflationary environment as consumers spend more for less.

In fact, volumes were 1.7% below February 2020 levels and anecdotal evidence advanced by the report suggests that the decrease in online sales was partly attributed to the Royal Mail strikes as consumers opted for in store shopping instead.



Source: Office for National Statistics (ONS), prepared by Richard Snow


GBP/USD Eases into the Weekend after a Period of Steady Appreciation

The GBP/USD weekly chart reveals what appears to be an inverse head and shoulders pattern. The head and shoulders pattern is widely viewed as a major reversal pattern and, should that be the case for cable, it may see the pair climb even higher in the coming weeks/months.

The neckline remains the first hurdle and price action this week has refused a test of the level – heading lower before the weekend.

GBP/USD Weekly Chart



Source: TradingView, prepared by Richard Snow


The daily chart reveals more granular price action as the pair retreats from that neckline level, back towards the zone of support around 1.2300. From here, bulls will be looking to find support and a bounce higher into next week – which could be helped if US GDP disappoints. Upon a potential move above the neckline, there is often a propensity for prices to then test the neckline (this time as support) before another leg higher. Thereafter, 1.2676 comes into play as a further resistance level.

Support as mentioned lies at 1.2300, followed by the psychological level of 1.2000 which is a fair distance away from current levels.

GBP/USD Daily Chart



Source: TradingView, prepared by Richard Snow

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