GBPUSD Falls to the Bottom Symmetrical Triangle as Retail Sales Disappoint; UK Labor Data Eyed
On Friday, the pound lost ground to the US dollar following the UK’s disappointing retail sales report. GBPUSD dropped from its intraday high of 1.3117 to 1.3006. The currency pair then finished the day at 1.3009, with a 68-pip loss.
According to data released by the Office for National Statistics, consumer spending contracted by 0.6% in December. This figure was well below expectations which were for an uptick of 0.5% as analysts expected that Boris Johnson’s win in the elections would somehow inspire spending. To make the report bleaker, the reading for November was revised lower from -0.6% to -0.8%. This marks the second consecutive contraction in retail sales. It also adds to a long list of disappointing data from the UK along with industrial production, trade balance, and CPI. Speculations of a rate cut from the BOE in the first quarter of the year went higher following the report.
UK Labor Figures Due Tomorrow
There are no reports due from the UK today. However, employment figures for December are due for release. The forecast is for the unemployment rate to come in at 3.8% and claimant count change to print at 33,400. Worse-than-expected data could be bearish for GBPUSD as traders begin pricing in a BOE rate cut.
On the 4-hour time frame, we can see that GBPUSD has been making lower highs and higher lows. When you connect those from November 20 to today, you a symmetrical triangle chart pattern becomes apparent. In forex trading, this chart pattern is often taken as a sign of consolidation. GBPUSD is currently testing support at the bottom of the triangle at the 1.3000 psychological handle. A candlestick closing below today’s Asian session low at 1.2988 could mean a break of trend line support. GBPUSD may soon be headed to near-term support at 1.2916 where it bottomed on December 24. If it does not hold, the next floor could be at 1.2830.
On the other hand, if there are enough buyers in today’s trading, we could see the currency pair make a run for the top of the triangle at 1.3045. A bullish close above this price may indicate an impending rally to 1.3175 where GBPUSD topped on January 7.