UK retail sales preview: What to expect of GBP/USD?

The GBP/USD pair is seen attempting a tepid bounce from daily lows, although remains capped below 1.2300 levels, as we progress towards the UK retail sales data due for release at 0830GMT, with markets expecting the retail trade to rebound sharply last month.

Retail sales to rebound in September

The retail sales data is expected to rebound 0.4% m/m in September, while on annualized basis too, retail sales are expected to tick lower to 4.8%. In July, retail sales dipped -1.2% over the month.

A better-than expected retail sales report could help the GBP bulls to conquer 1.23 handle, refueling the recovery mode in the cable from multi-decade lows. While a failure to meet estimates would knock-off the pair to 1.22 handle.

However, limited reaction is expected on the data as the main risk event for the fx markets remains the ECB policy decision, which will have a “rub-off” effect on the GBP across the board.

Deviation impact on GBP/USD

Readers can find FX Street's proprietary deviation impact map of the event below. As observed the reaction is likely to remain confined between 10 and 60 pips in deviations up to 3.5 to -1.5, although in some cases, if notable enough, a deviation can fuel movements of upto 100 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “With short-term technical indicators moving out of oversold conditions, the pair has been trending higher within an ascending trend-channel formation on 4-hourly chart and is now reversing from the trend-channel resistance. Hence, subsequent retracement below 1.2250 immediate support is likely to take the pair back towards channel support, currently near 1.2200-1.2190 area.”

“On the flip side, the pair has been struggling to extend its recovery momentum beyond 1.2300 handle, which now becomes immediate hurdle to clear. However, a follow through momentum above 1.2300 handle might now confront strong resistance near 1.2330 horizontal level, which now seems to have emerged as immediate strong resistance.”