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

The GBP/USD pair extends its retreat from 1.3280 levels, and now meanders near session lows of 1.3234 as we progress towards the UK retail sales data due for release at 0830GMT, with markets expecting the retail trade to drop in August.

Retail sales to rebound in August

The retail sales data is expected to drop -0.5% m/m in August, while on annualized basis too, retail sales are expected to tick lower to 5.3%y. In July, retail sales rose 1.4% over the month.

A better-than expected retail sales report could provide fresh impetus to the GBP bulls, driving the GBP/USD pair back towards daily top and beyond. While a failure to meet estimates would knock-off the pair below 1.32 handle.

However, not much reaction is expected in the major on the data release, as the main market moving event for today remains the BOE interest rate decision.

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 20 and 40 pips in deviations up to 2 to -2, although in some cases, if notable enough, a deviation can fuel movements of up to 70 pips.

GBP/USD Technical Levels

Haresh Menghani, Analyst at FXStreet explains, “The pair is turning back lower after retesting a short-term ascending trend-channel break-point turned resistance. Hence, renewed weakness back below 1.3220, leading to a subsequent drop below 1.3165-60 support area, is likely to exert additional selling pressure and continue dragging the towards its next major support near 1.3080-60 region (nearing 61.8% Fibonacci retracement level of 1.2865-1.3445 up-swing.”

“Alternatively, on a sustained recovery back above 1.3260-65 immediate resistance, the pair seems to immediately dart towards 1.3300 handle (23.6% Fibonacci retracement level) ahead of a horizontal resistance near 1.3335-40 area. A convincing strength above 1.3335-40 strong resistance would negate any near-term bearish bias and assist the pair back towards reclaiming 1.3400 handle.”