The GBP to USD (GBPUSD) is falling today as traders react to the mixed economic data from the UK. While retail sales bounced back in September, consumer confidence plunged in October, leading many to worry about a double-dip recession.
According to Gfk, consumer confidence in the UK declined to -31 in October as worries of a no-deal Brexit coincided with the rising number of Covid-19 cases. This lack of confidence led to weak consumer spending as the government implemented circuit breaker measures to halt the virus from spreading. Still, the number of cases has continued to rise in the country. Yesterday, the government confirmed more than 21,000 infections, the highest reading on record.
On a positive side, the GBPUSD price reacted to the relatively strong retail sales in September. According to the Office of National Statistics (ONS), the headline sales rose by 1.5% in September, leading to an annualised gain of 4.7%. The two were better than the expected increase of 0.4% and 3.7%. At the same time, the core CPI, which strips the volatile food and energy products rose by 1.6% in September leading to a YoY gain of 6.4%.
Later today, the GBP to USD price will react to the flash manufacturing, services, and composite PMI data by Markit and CIPS. Analysts polled by Reuters expect the data will show that the manufacturing PMI rose from 54.1 to 54.3 while the services PMI is expected to fall 56.1 to 55.0.
GBPUSD technical outlook
The four-hour chart shows that the GBPUSD price is trading at 1.3053, which is substantially lower than this week’s high of 1.3180. The price has dropped in the past ten consecutive four hours. Consequently, it has moved below the median line of the Andrews pitchfork. It is now attempting to move below the first support. Also, the pair is below the 50% Fibonacci retracement level.
Therefore, I suspect that the price will continue falling as bears aim for the 38.2% retracement and the second pitchfork resistance at 1.2990. On the flip side, a move above the median line of the pitchfork will invalidate this trend because it will send a signal that there are still buyers in the market.
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GBP to USD technical chart
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