The GBP/USD declined significantly in the second half of last week and is extending its slump in the beginning of this one. The drop in the pound came after we reached fresh new highs for the period after June 20th. Then some pretty bad numbers for the retail sales were announced and we saw the British currency move to lower territories. Market participants expected the retail sales to grow at a slower pace, but instead they saw them inching just 0.1% higher than the previous period. After the news was announced the GBP/USD slipped and moved lower for quite some time. Even the better-than-expected public sector net borrowing number, which were announced last Friday were not able to spark the interest of investors in the pound. As concerns about the strength of the European economy among market participants grew, the latter decided to shed their holding in risky assets and buy safe havens. As a result the dollar appreciated against almost all its major counterparts, including the sterling. The selling in the GBP/USD intensified on Monday when major stock exchanges moved lower and fear among investors increased. Since the beginning of the slump the GBP/USD has pushed below its 25-period, its 50-period and its 200-period moving averages and is currently trading around the 1.5500 level. This level is providing decent support for the currency pair and it remained unbroken even after the BBA mortgage approvals were released on Tuesday. The figures were quite disappointing, coming at 26.3K against the expected 31.4K. To make the matters worse, the number for the previous period was revised on the downside – from 30.2K to 29.6K. Today the pound tried to push higher, trading around 1.5550 at one point during the session, but after the preliminary GDP numbers were announced the British currency dropped significantly, marking a fresh new low for the week. Analysts were expecting to see a modest contraction of 0.2% of the gross domestic product on the quarter-over-quarter basis, but instead they saw a much sharper slump of 0.7%. Figures for the previous quarter were also revised on the downside – from -0.2% to -0.3%. Despite this horrible news release the bulls seem to be holding their ground, at least for now, as they managed to pare some of the sterling’s earlier losses and send it back to the 1.5500 level.
Technically speaking, resistance in the GBP/USD is provided by the 200-period moving average, which is standing at 1.5591. Support, as we already mentioned, stands at the 1.5500 level. The 25-period and the 50-period moving averages have just entered in a death cross formation, but the 50-period and the 200-period moving averages continue to be in a golden cross formation. Oscillators are moving close to the lower band of their respective ranges with the relative strength index at 37 and the stochastic at 26. The MACD is below the key 0 level, but it is still not issuing any buy signals.
The information in this analysis is collected from different sources and should serve for informative purposes only. The author shall not be held responsible for the validity of the presented information. No part of this analysis recommends the purchase or sale of a currency pair or any other financial instrument.