GBPUSD Below 1.30 in No Time, As Data Shows Deteriorating UK Economy

GBPUSD experienced a bullish breakout early in the month surpassing the key 1.30 level, but the price has dipped below this level, opening the door for further declines. During the first half of May, buyers dominated this pair, however, the rally paused at 1.3044 following a positive US retail sales report, which showed that US consumers remain resilient despite some pressure from higher interest rates and borrowing costs.

GBP/USD Chart H4 – The 20 SMA Has Been Broken

But yesterday, the price reversed course, ending at 1.0940s and dropping down below 1.3000, suggesting that the bulls’ hold on the market is waning. The USD’s recovery yesterday was driven by the strong US retail sales data and the robust Philadelphia Federal Reserve manufacturing report received this week, suggesting that reports of declining consumer spending may have been overstated.

The pair has been rising since bottoming on July 2, according to the H4 chart. From lows of 1.26 to this week’s high of 1.3044, the pair has gained more than 4 cents in just 11 days, which is a notable change in a short amount of time. But, the rising 20 SMA, which has served as support twice since July 2023, was broken yesterday in the US session.

GBP/USD Peaks Above 1.30 and Reverses Back Down

The GBP/USD pair peaked at 1.3043, reaching its highest level since July of last year, before beginning to decline. This move allowed the price to break past the psychological barrier of 1.3000. However, the price reversed course yesterday, closing in the 1.0940s and dropping below 1.3000, indicating that the bulls’ grip on the market may be weakening.

Technical Analysis

GBP/USD gained more than 4 cents from lows of 1.26 to this week’s high of 1.3044, a notable increase in a short time. Given this rapid rise, there is potential for a decline and possibly a bearish reversal. Sellers pushed the pair below the rising 20 SMA, which has acted as support twice since July 2023. According to the H4 chart, the pair has been on an upward trajectory since bottoming out on July 2. But the reversal seems quite steep after the doji candlestick at the top, which did signal it.

UK June Retail Sales Released by ONS

• UK June retail sales fell by -1.2% month-over-month, compared to the expected -0.4%, following a prior increase of +2.9%.
• Retail sales declined by -0.2% year-over-year, against the expected +0.2%, with the previous figure revised from +1.3% to +1.7%.
• Retail sales excluding autos and fuel dropped by -1.5% month-over-month, below the expected -0.5%, after a previous rise of +2.9%.
• Retail sales excluding autos and fuel decreased by -0.8% year-over-year, missing the expected +0.2%, with the prior figure revised from +1.2% to +1.6%.

The latest data paints a bleak picture, confirming that household spending in the UK continues to decline as prices rise. The numbers show that food store sales dropped by 1.1% month on month, department store sales decreased by 3.4%, and non-food store sales fell by 1.9%. Additionally, there were declines in textile, clothing, and footwear sales (-1.6%), household goods (-2.1%), and non-store retailing (-1.1%).

GBP/USD Live Chart