GBP/USD, Oil Forecast: Two Trades to Watch

Fiona Cincotta
By :  ,  Senior Market Analyst

GBP/USD rises after retail sales jump

  • Retail sales rise 0.7% MoM vs 0.2% forecast
  • USD falls after 3-days of gains
  • GBP/USD rises from support of 20 sma

GBP/USD is rising amid renewed USD weakness and after stronger-than-expected UK retail sales.

UK retail sales jumped 0.7% MoM in June, up from 0.3% in May and well ahead of the 0.2% forecast after the warmest June on record encouraged shoppers into department stores and supermarkets to stock up on everything from food to clothes and furniture.

The data suggest that the UK consumer is proving to be resilient despite strong headwinds from rising prices and high-interest rates.

The data boosts the case for further first-rate hikes from the Bank of England as inflation is still over four times the central bank's 2% target.

Retail sales have held up surprisingly well so far in 2023. However, the outlook is expected to darken, and more households brace for a large increase in monthly mortgage payments.

Prior to the retail sales data GFK consumer confidence fell for the first time in six months in July as reality starts to bite. Concerns over personal finances and the wider UK economy, so GFK's consumer confidence index dropped six points to minus 30.

Meanwhile, The US dollar is heading lower after three days of solid gains. Losses in the greenback could be limited following yesterday's data which highlighted tightness in the US labour market and supported further monetary policy tightening from the Fed.

There is no high-impacting UK economic data due to be released attention will turn to the Federal Reserve rate decision next week,

GBP/USD is still heading for its largest weekly loss since January after weaker-than-expected CPI data saw the market rein in peak rate expectations to 6%.

GBP/USD forecast – technical analysis

After running into resistance at 1.3140, GBP/USD rebounded lower, falling below the multi-month rising trendline dating back to August last year. The price found support on the 20 sma at 1.2840, which is also the June high.

The price is trading caught between the 20 sma and the rising trendline resistance; the RSI is just above 50.

Buyers will look for a rise back over the rising trendline resistance at 1.2950, bringing 1.30 the psychological level into focus and 1.3140 the 2023 high.

On the downside, sellers could look for a fall below the 20 sma and June high of 1.2840 to open the door to 1.2660, the confluence of the 50 sma, and rising trendline support. Below, support can be seen at 1.2590, with a break below here creating a lower low.

gbp/usd forecast chart

Oil rises on China stimulus optimism

  • China pledges stimulus to boost
  • US recession fears ease
  • Oil tests multi-month falling trendline resistance

Father oil prices are rising for a second straight day, and I'll set to rise across the week marking the fourth consecutive weekly increase.

Oil prices are being lifted by optimism that China the world's largest crude oil importer will roll out more stimulus to support its faltering economy.

After disappointing Q2 GDP data earlier this week, Beijing has unveiled new measures to best consumption and raise expectations of further support.

Meanwhile, growing optimism that the US could avoid a hard landing also supports the oil demand outlook. Several major investment banks have lowered expectations for a session in the US later this year or early next year.

There is some caution ahead of next week's Federal Reserve interest rate decision. The dollar rebounded from a 15-month low as traders' position for the meeting has capped gains in oil.

Baker Hughes, oil rig data is due later today.

Oil forecast – technical analysis

Oil is testing the resistance of the multi-month falling trendline dating back to late last year. The RSI supports further upside while it remains out of overbought territory.

A rise above the trendline resistance at 76.50 opens the door to 77.50, the weekly high. A rise above here creates a higher high, bringing 79.15, the 80.00 psychological level, into focus.

Should sellers defend the falling trendline line, sellers could test the 100 sma at 73.50, which is just below the weekly low. A break below here opens the door to 70.00, the round number.



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