UK July retail sales bested expectations, rising by 0.3% m/m, though the rate of expansion was half that seen in June. The median forecast had been for a 0.2% m/m gain. he y/y figure rose 1.3% y/y, down form 2.8% y/y growth in June. June data were revised down slightly, to 0.6% m/m from 0.7% m/m, and to 2.8% y/y from 2.9% y/y. The data affirm a decent summer season for the retail sector, although the outlook remains somewhat clouded for the sector. The private BRC group noted in its July report a challenging outlook amid a “shrinking pool of discretionary consumer spending power.”
The pound sprang high in the immediate wake of the data release, but follow-through proved lacking. Cable despite the 23 pips up yesterday , it presents in shorter time-frames such as 4-hour and hourly chart a resistance at 1.2910-1.2920 area. In a 4-hour timeframe , the pair moves on the lower Bollinger bands pattern since Monday, while a Tweezer Top has been formed early at 1.2908 level and indicates further intra-day weakness for the pair. In the hourly chart, cable is currently traded below 20-period MA, after 5 consecutive bearish sessions. Meanwhile the 10-period EMA is sloping downwards, while RSI (14) is at 50 and shorter timeframe RSI (7) is at 39 looking down.
These observations prompted a Short Hourly position, with entry at 1.2886 ( which was the open price after data release). Targets were set at 1.2860 and 1.2840 based on ATR (5) indicator and Fibonacci Retracement since yesterday. Support is at 1.2915.
This position is in favour of Daily Cable Chart, since GBPUSD seen in a strong downtrend since August 3rd. Therefore a closing below the 1.2860 level which is also the 200-Day EMA or a closing this week below the 1.2830 level which is a confluence of a trendline set since July 4th , will both indicate further weakness to the pair, with immediate support at 1.2710-1.2750 area.
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