GBPUSD Technical Analysis – Key levels in play ahead of the UK Retail Sales

USD

• The Fed left interest rates unchanged as
  expected while dropping the tightening bias in the statement but adding a
  slight pushback against a March rate
  cut.
• Fed Chair Powell stressed
  that they want to see more evidence of inflation falling back to target and
  that a rate cut in March is not their base case.
• The US CPI beat
  expectations for the second consecutive month with the disinflationary trend
  reversing.
• The US Initial Claims beat
  expectations while Continuing Claims missed. Overall, the data remains steady.
• The ISM Manufacturing
  PMI
  surprised to the upside with the new orders index, which is considered a
  leading indicator, jumping back into expansion. Similarly, the ISM Services PMI beat
  expectations across the board with the employment sub-index erasing the prior
  drop and prices paid jumping above 60.
• The US Retail Sales missed
  expectations across the board by a big margin.
• The market now expects the first rate cut in June.

GBP

• The BoE left interest rates unchanged as expected at the last meeting
  removing the tightening bias but reaffirming that they will keep rates high for
  sufficiently long to return to the 2% target.
• The employment report beat expectations across the board
  with a positive revision to the December’s negative payroll figure.
• The UK CPI missed expectations across the board but with
  Services inflation remaining sticky, which continues to support the BoE’s
  patient stance.
• The latest UK PMIs showed the Manufacturing sector improving but
  remaining in contraction while the Services sector continues to expand.
• The latest UK Retail Sales missed expectations across the
  board by a big margin as consumer spending remains weak.
• The market expects the first rate
  cut in June.

GBPUSD Technical Analysis –
Daily Timeframe

On the daily chart, we can see that GBPUSD recently
got rejected from the red 21 moving average
following the hot US CPI report and bounced again around the 1.25 handle. The
price is now stuck in a tighter range between the 1.2614 resistance and the
1.2535 support. The buyers will want to see the price breaking higher to
position for a rally into the 1.28 resistance next, while the sellers will want
to see the price breaking lower to start targeting the 1.22 handle.

GBPUSD Technical Analysis –
4 hour Timeframe

On the 4 hour chart, we can see more closely the
rangebound price action which is often hard to trade due to its erratic nature.
The best strategy is generally to sit out and wait for a clear breakout
supported by a fundamental catalyst although one can also “play the range” by
buying at support and selling at resistance.

GBPUSD Technical Analysis –
1 hour Timeframe

On the 1 hour chart, we can see that the
pair yesterday surged into the resistance following the miss in the US Retail
Sales. We now have a good support zone around the 1.2573 level where we can
find the confluence with
the red 21 moving average and the 50% Fibonacci
retracement level. This is where we can expect the
buyers to step in to target a break above the resistance. The sellers, on the
other hand, will want to see the price breaking lower to target a break below
the support and new lows.

Upcoming Events

Today we get the UK Retail Sales in the morning and
later in the day, the US PPI data and the University of Michigan Consumer
Sentiment survey.