- Summary:
- The US dollar has weakened after last week's rally, and GBPUSD now looks for fresh impetus from new data this week.
GBPUSD leveraged a weak dollar to rise marginally at the opening of the European trading session on Monday. It traded at 1.2607, after gaining 0.06%, but remains within a general downtrend stretching back two weeks. GBPUSD is buoyed by the forecast-beating retail sales data released on Friday, and yields on US Treasury bonds, which have eased.
UK’s core retail sales (excluding auto sales and fuel) rose by 0.2% month-on-month in February, beating the forecast contraction of -0.1%. Overall retail sales remained unchanged month-on-month, outperforming the forecast contraction of -0.4%. The market has largely digested the Fed and BoE’s latest interest rate decisions and the GBPUSD pair near-term direction will be defined by new macroeconomic data.
Geopolitical developments around the Russia-Ukraine war are likely to bolster safe haven US dollar. The two nations have raised their war rhetoric in recent days, and there was a notable escalation over the weekend. Furthermore, Russia’s move to link Ukraine to the Moscow terrorist attack underlines the gravity of the outlook. In addition, the two countries have upped attacks on each other’s energy infrastructure. On Friday, Russia conducted the largest strike on Ukraine’s power facilities in two years. Ukraine, on the other hand, attacked two Russian landing ships in Crimea over the weekend.
Looking ahead, the cable will be impacted by US New Home Sales data for February, which is forecast to rise by 14k to 675k. Also, investors will look at US new building permits and look for cues from BoE MPC member, Catherine Mann.
Technical analysis
The RSI for the GBPUSD points to control by the sellers, with the pivot at 1.2625. The downside will prevail as long as resistance remains at that mark. That could break the support at 1.2575 and possibly touch 1.2550 in extension. However, a move above the pivot could provide upward momentum towards 1.2650, beyond which the downside narrative will become invalid and the next resistance at 1.2675 will be within reach.
