GBP/USD Fundamental Analysis
- The GBP/USD pair fell for the third day in a row below 200-Day SMA.
- The British Pound continues to weaken from concerns that the BoE is ending its rate-hiking cycle.
- US Dollar strengthened on speculations that the Fed will raise rates again soon.
UK monthly Retail Sales data
The Office for National Statistics (ONS) issued the monthly UK retail sales figures for January 2023 on Friday, February 17. The data show that it increased by 0.5% MoM compared to a market prediction of -0.3% and earlier readings of -1.0%. As a result, the forex pair GBP/USD capped some of its losses, however failed to reverse the negative trend for the day.
It’s worth noting that despite the most recent uptick, the dovish Bank of England (BoE) stance, which draws its signals from dismal British employment and inflation figures revealed earlier in the week, continues to be too powerful to overcome. As a result, there is further pressure on the British Pound (GBP) due to anticipation that the BoE’s existing phase of tightening policy might be coming to an end.
The January Retail Sales in the United Kingdom were a positive relief. However, despite the positive report, the GBP/USD is touching new lows.
Fed official’s hawkish attitude
Even though the UK retail sales data was better than anticipated, it doesn’t matter. Market participants are currently focusing on the Dollar and the Fed’s forecast.
Federal Reserve members Loretta Mester and James Bullard made hawkish comments in support of 50bps rises yesterday, on February 16. Thus, investors are wagering on a higher raise at the following meeting.
The Dollar reaches a new six-week high due to rising expectations that the Federal Reserve will continue its hawkish approach because of continuously rising inflation.
The US Dollar is strengthening as USD investors maintain their repricing of rate rise expectations. Furthermore, the Pound is falling due to risk-off market sentiment. As a result, GBP/USD is falling.
GBP/USD Technical Analysis
Currently, the technical analysis of the Daily GBP/USD chart shows that 200-Day SMA is holding the pair from further fall. The currency pair has already dropped below the psychological 1.2000 level, and now it has also broken below the 200-Day Simple Moving Average at 1.19445. However, the next 100-Day SMA is going to provide initial support after this level at 1.18881 level. Any break below this level would trigger a massive bearish pressure towards the 1.17440 level.
In the bullish scenario, the forex pair GBP/USD could recover some of its losses if it manages to hold above the 1.19445 level. However, there are more chances of a negative trend continuation than a reversal. These signs are also confirmed by the technical indicators applied to the chart. The Stochastic Oscillator entering the oversold zone, along with the red signal line of Moving Average Convergence & Divergence cutting the histograms from above, confirms the selling pressure.
Furthermore, the 20-Day Simple Moving Average line is also about to cut the 50-Day Simple Moving Average line, giving support to the prevailing bearish trend. The idea is to wait for confirmation of the bearish trend at the break below the 1.18881 level. Traders might want to place short positions on any break below this level.
GBP/USD Daily Technical Levels:
Pivot Point: 1.2011