GBP/USD, Gold forecast: Two trades to watch

GBP/USD rises after upbeat retail sales

• UK retail sales rise 0.5% MoM, vs 0.3% exp.
• Ofgem lowers energy bill price cap to £2074
• GBP/USD finds support at the 100 sma

GBP/USD is rising after four straight days of declines as investors cheer the latest retail sales data under the US to reporters for breath after an impressive rally.

UK retail sales rose 0.5%, MoM, ahead of the 0.3% forecast and a rebound from a downwardly revised 1.3% MoM in March.

Retail sales are notoriously volatile. The data comes as the outlook for the UK economy appears to be brightening, albeit slowly. The jobs market remains resilient, consumer sentiment is recovering, and inflation is starting to cool. However, there is still some way to go, and retailers are not out of the woods yet.

The BoE is expected to raise interest rates by 25 basis points again in June. Furthermore, around 2.5 million households will face a rise in mortgage payments this year, meaning consumers will remain squeezed. However, with Ofgem lowering the price cap from £2500 to £2074, discretionary spending could also receive a bit of a boost.

Meanwhile, the USD is pausing after a strong rally across the week, lifted by rising expectations that the Fed could hike rates again in June after a series of stronger-than-forecast data, including an upward revision to Q1 GDP.

Attention will now shift to US core PCE, the Fed’s preferred gauge for inflation, and US debt ceiling negotiations, where the two sides appear to be closing in on a deal.

GBP/USD forecast -technical analysts

GBP/USD ran into resistance at 1.2680 and has been trending lower since, falling below the 20 & 50 sma and the multi-month rising trendline support.

The price has found support at 1.23, just above the 100 sma. Sellers will need to break down this support in order to extend the bearish trend towards 1.2190, the March 27 low.

Buyers will look for a rise above 1.2430, the 50 sma, to attack 1.25, the confluence of the 20 sma, and the rising trendline support turned resistance. A rise above here could negate the near-term downtrend.

Gold looks to US core PCE data & debt ceiling talks

• Debt ceiling talks are nearing a deal
• US core PCE forecast to stay at 4.6%
• Gold rebounds from 100 sma

Gold is edging higher, snapping a two-day losing streak as investors weigh up the latest debt ceiling negotiation developments and look towards the release of a slew of US data.

Gold has traded under pressure in recent sessions, weighed down by a stronger USD and rising treasury yields. Today the USD rally is on pause, allowing Gold to rebound off the key 100 sma support and a 2-month low of $1935.

Still, the greenback is on track for its third straight week of gains, boosted by safe-haven appeal as the US debt ceiling deadline approaches and by upbeat US economic data.

The mood music has improved, and President Biden and House Speaker Kevin McCarthy are reportedly just $70 billion away from an agreement. This means that a deal could be agreed by this weekend.

US Q1 GDP was upwardly revised to 1.3% annualized, thanks to stronger-than-expected consumer spending. US jobless claims were stronger than expected at 229k, lower than the 245k forecast.

Markets are currently pricing in a 38% probability of the Fed hiking interest rates by 25 bps in the June meeting.

Attention now shifts to US core PCE data, the Fed’s preferred measure for inflation, which is expected to show that inflation held steady at 4.6% YoY in April. Hotter-than-expected inflation could fuel Fed rate hike bets.

US durable goods orders are also due and are expected to fall -1% YoY in April after rising 3.2% in April.

University of Michigan confidence is set to fall to 57.7 in May from 63.5 in April.

Cooler than forecast inflation, weak durable goods orders, and falling consumer confidence could fuel bets that the Fed will pause rate hikes in June.

Gold forecast – technical analysis

Gold has been trending lower across the month, finding support on the 100 sma and the multi-month rising trendline at $1935. The RSI below 50 keeps sellers hopeful of further downside, as does the 20 sma, being on the brink of breaking below the 50 sma

Bears need to break below 1935 to extend the downtrend towards 1917, the March 17 low, and February 3^rd high.

On the flip side, the rise above 1950 brings 1970 the falling trendline resistance and the April 20 low into focus. A rise above here brings 1985 the weekly high into focus.