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

The GBP/USD pair failed several attempts to reach towards 1.24 handle, but in vain, sentiment around the GBP remains dampened amid expectations of no growth in the retail sales volumes for the month of December.  The report will be published later this session at 0930GMT.

Retail sales to remain flat in December

The retail sales data is expected to remain unchanged at 0.2% m/m in December, while on annualized basis, retail sales are expected to jump to 7.3%. In November, retail sales rose 5.9% over the month.

A better-than expected retail sales report could help the GBP bulls to conquer 1.24 handle, refueling the recovery mode in the cable from 1.2250 levels. While a failure to meet estimates would knock-off the pair to 5-DMA support at 1.2285.

Analyst at TDS note, “With anecdotal reports that the majority of retailers experienced strong holiday sales, and consumers pulling forward durable goods purchases before the exchange-rate pass-through boost to prices, we look for Dec retail sales to hold up well.  We look for +0.4% m/m compared with the –0.1% that markets are looking for.”

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 70 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, “A decisive strength above 1.2350 region, leading to a subsequent move above session peak 1.2370 level, should lift the pair back above 1.2400 handle towards testing 50-day SMA important resistance near 1.2415-20 region. A convincing break through 50-day SMA hurdle is likely to trigger a fresh bout of short-covering and accelerate the up-move towards 1.2475-80 resistance, en-route 1.2500 psychological mark.”

“On the flip side, 1.2310-1.2300 region (nearing 23.6% Fibonacci retracement level) now seems to protect immediate downside, which if broken seems to drag the pair back towards 1.2250 region.”