In the first half of last week’s trading, the price of the GBP/USD currency pair succeeded in rebounding higher with gains to the resistance level 1.3147. This is due to the investors’ balancing of the future of raising interest rates where the factors were in favor of the dollar. It returned the currency pair to the vicinity of its broader descending channel and stabilized around the support level 1.3050 at the beginning of this week's trading. The performance of the currency pair has often been noted on the possibility of its occurrence, especially with the Bank of England abandoning the markets' bets for a strong future to tighten its policy during the year 2022, in second place after the US Federal Reserve.
On the economic side, the GBP/USD currency pair is trading influenced by the announcement that the US Retail Sales Monitoring Group on Thursday posted -0.2% decline for the month of March compared to the expected 0.1% growth. General retail sales for the period grew 0.5% compared to the expected growth rate of 0.6% (MoM), while retail sales ex-autos increased 1.1% (MoM) versus market estimates of 1%. Prior to that, the US PPI was reported to outperform both the (monthly) and (annual) forecasts, while the equivalent CPI data missed estimates in both cases.
From the UK, the general CPI for March beat expectations (y/y) at 6.7% with a change of 7%. The EQ (MoM) also beat expectations at 0.7% by 1.1%, while core CPI for the period beat the estimate (YoY) of 5.4% with a change of 5.7%. Elsewhere, the output of the core CPI price, the producer price index and the retail price index beat expectations across all sectors.
Overall, the British pound reversed losses in early April against the dollar and the euro after a significant rally in mid-trading last week and there is evidence that this show may have originated in Beijing and was part of an effort to prevent a lower euro from raising the trade-weighted renminbi. Sterling remained close to April highs against the dollar and euro last Thursday after a rally late on Wednesday that had no clear catalyst to spark it but likely reflects an attempt to prevent or perhaps even reverse a trade-weighted renminbi appreciation.
Policymakers in Beijing have often sought a depreciation in the trade-weighted renminbi throughout the roughly two-year period of the currency's rally, something that is likely to have widespread repercussions for others including the pound, dollar, euro, yen and Swiss franc. While noting first of all that an upward corrective shift in the long downtrend of the USD/CAD exchange rate is likely to rise in the future, this could also have broadly bullish implications for the likes of USD/CHF and USD/JPY and impacts variable on sterling.
According to the technical analysis of the GBP/USD: In the near term and according to the performance of the hourly chart, it appears that the GBP/USD currency pair is trading within a solid triangle formation. This indicates that there is no clear directional momentum in the market sentiment. Therefore, the bulls will target potential ascending triangle breakout profits at around 1.3073 or higher at 1.3094. On the other hand, the bears will target short-term pullbacks at around 1.3036 or lower at 1.3016.
In the long term and according to the performance on the daily chart, it appears that the GBP/USD currency pair is trading within the formation of a descending channel. This indicates a significant long-term bearish momentum in market sentiment. Therefore, the bears will look to ride the current downtrend towards 1.2968 or lower to 1.2839. On the other hand, the bulls will target channel breakout profits at around 1.3192 or higher at 1.3371.