GBPUSD Remains Near 1.25, Awaits Impetus for Movement
20 May 2022
The USD traded slightly lower on Friday, motivating traders to push other currencies higher.
Ahead of the US session, the cable traded somewhat higher on the day, trying to attack the 1.25 threshold again.
Volatility might be lower throughout the rest of the day, as movements in the markets have been pretty wild this week, with investors possibly unwilling to take big deals ahead of the weekend.
Retail sales exceeded expectations
Earlier today, UK retail sales increased by 1.4% month on month April, compared to -0.2% projected and -1.2% in March. Core retail sales, excluding vehicle motor fuel sales, increased by 1.4% monthly, versus -0.2% predicted and -0.9% previously.
On an annualized basis, UK retail sales fell 4.9% in April, against -7.2% predicted and 1.3% previously, while core retail sales fell 6.1%, compared to -8.4% projected and -0.2 percent previously.
Moreover, Huw Pill, the Chief Economist of the Bank of England (BOE), warned on Friday that policy tightening still has a long way to go.
"MPC sees an upside skew in the risks around the inflation baseline in the latter part of the forecast period."
Further upside likely
It looks like the major resistance for GBPUSD now stands in the 1.25 area. If bulls successfully push the price above that level, we might see further rally toward 1.26 or 1.2650.
On the downside, the 1.24 level should act as a meaningful support. As long as the GBP trades above it, the short-term outlook appears bullish. If cable drops below that, it might revisit the current cycle lows near 1.22.
The daily chart still remains oversold, considering the recent massive decline, likely prompting more short-covering amid some positive news.