GBPUSD Analysis: The Cable Loses Sight of 1.2800 After Mixed US Data

Summary:
• GBPUSD is in a delicate balance after US retail sales data fell short of expectations, while jobs figures and PPI overshot the target.

GBPUSD slid below 1.2800 in the New York session on Thursday, after mixed US macroeconomic data. The cable traded at 1.2779 at the time of writing, as traders digested the implications of a mixed bag containing lower-than-expected US February consumer spending, higher-than-expected producer prices and lower-than-expected unemployment data.

The US economy witnessed a spike in the cost of production in February by 0.6%, beating the forecast figure of 0.3% which matched the January rate. The core PPI, which is the cost of producer prices minus food and energy, also beat the forecast figure by 0.1% to reach 0.3%.  

While the above outlook would normally indicate underlying inflationary pressures, the retail sales data curtailed potential resultant gains by the dollar. Core retail sales increased at a slower rate of 0.6%, which was below the forecast 0.8% for the month. Similarly, the core retail sales data (excluding automobiles) came in at 0.3%, missing the forecast 0.5%.

The dollar will, however, get support from the latest labour market data, which showed a reduction in initial jobless claims to 209,000 from the previous week’s reading of 210,000 (adjusted from 217k).  In addition, yields on benchmark 10-year and 5-year US Treasury bonds have returned above 4.200% as of this writing, providing further propulsion for the greenback.

There won’t be any high-impact data from either the US or the UK on Friday, and this means that the GBPUSD pair will likely trade within small margins of 1.2800 heading into the weekend. In the interim period, the dollar could get some support from safe haven buying depending on developments in the Israel-Hamas and Russia-Ukraine wars.

Technical analysis

GBPUSD will likely pivot at 1.2794, and the buyers need to keep the pair above this level to maintain upside momentum. Doing so would likely see the exchange rate go above the 1.2815 resistance, and possibly test 1.2823 in extension.

However, there will likely be a downward momentum as long as the currency pair trades below 1.2794. That would likely lead to a breach of the support at 1.2771, which would being the next target to 1.2760.