Daily Analysis For GBP/USD  26-05-2023

Daily Analysis For GBP/USD 26-05-2023

GBP/USD Analysis
Key Points for GBP/USD pair
• The GBP/USD currency pair has experienced a rebound from the level of 1.2330. However, the overall bias remains tilted towards the downside.
• Investors are primarily focused on the issues surrounding the US debt ceiling, giving more weight to this concern rather than the dovish signals coming from the Federal Open Market Committee (FOMC) minutes.
• In the United Kingdom, Jeremy Hunt, a prominent figure, expressed confidence that inflation will be reduced by half by the end of the year.

Today's Scenario: - The GBP/USD pair has initiated a recovery after finding support around 1.2320 during the Tokyo session. The ongoing decline in the US Dollar Index (DXY) below 104.10 has contributed to the expectation of a potential pause in the Federal Reserve's (Fed) policy-tightening measures, further supporting the Cable's recovery.
Early in the Asian session, S&P500 futures recorded notable losses as investors expressed caution due to unresolved issues regarding the US borrowing cap. The discrepancy in proposed budget spending between the White House and Republican leaders has narrowed to $70 billion from the original proposal of $1 trillion. House of Representatives Kevin McCarthy stated that bipartisan efforts are underway to address the matter.
However, US Treasury Secretary Janet Yellen continues to warn that the federal government will exhaust its funds by June 1 and could potentially default on certain payment obligations.
As the Fed's rate-hiking trajectory may experience a pause, the USD Index is anticipated to decline further towards 104.00. This adjustment would reduce the interest rate divergence between the Fed and other central banks. Richmond Fed Bank President Thomas Barkin mentioned on Thursday that the US labor market remains tight and acknowledged that some businesses still express the need to raise prices. However, he also noted that higher interest rates and tight credit conditions imposed by regional US banks have significantly impacted demand.
On the Pound Sterling front, investors are eagerly awaiting the release of the United Kingdom's Retail Sales data for April. The preliminary report suggests a monthly expansion of 0.3% compared to the previous month's contraction of 0.9%. Additionally, annual Retail Sales are expected to contract by 2.8% versus a contraction of 3.1% previously. A rebound in retail demand could potentially contribute to inflationary pressures, thereby posing additional challenges for the Bank of England (BoE).

Diagram of GBP/USD
Economic Events: -

Economic Events: -
00:30(Japan) Tokyo Core CPI YoYLowJPY
00:30(Japan) Tokyo CPI YoYLowJPY
00:30(Japan) Tokyo CPI Ex Food and Energy YoYLowJPY
02:30(Australia) Retail Sales MoMHighAUD
04:35(Japan) 3-Month Bill AuctionLowJPY
06:00(Japan) Leading Economic IndexLowJPY
06:00(Japan) Coincident IndexLowJPY
07:00(Lithuania) Retail Sales MoMLowEUR
07:00(Lithuania) Retail Sales YoYLowEUR
07:00(United Kingdom) Retail Sales ex Fuel MoMHighGBP
07:00(United Kingdom) Retail Sales ex Fuel YoYHighGBP
07:00(United Kingdom) Retail Sales YoYHighGBP
07:00(United Kingdom) Retail Sales MoMHighGBP
07:30(Switzerland) Non Farm PayrollsLowCHF
07:45(France) Consumer ConfidenceMediumEUR
08:15(Euro Area) ECB Enria SpeechLowEUR
08:40(Euro Area) ECB Lane SpeechMediumEUR
09:00(Italy) Consumer ConfidenceMediumEUR
09:00(Italy) Business ConfidenceMediumEUR
09:00(Austria) Bank Austria Manufacturing PMIHighEUR
10:10(Italy) 6-Month BOT AuctionLowEUR
11:00(France) Jobseekers TotalLowEUR
11:00(France) Unemployment Benefit ClaimsMediumEUR
11:00(Luxembourg) Balance of TradeLowEUR
13:30(Canada) Wholesale Sales MoMLowCAD
13:30(United States) Goods Trade BalanceHighUSD
13:30(United States) Wholesale Inventories MoMMediumUSD
13:30(United States) Core PCE Price Index MoMHighUSD
13:30(United States) Core PCE Price Index YoYLowUSD
13:30(United States) PCE Price Index MoMMediumUSD
13:30(United States) PCE Price Index YoYMediumUSD
13:30(United States) Personal Spending MoMHighUSD
13:30(United States) Personal Income MoMHighUSD
13:30(United States) Retail Inventories Ex Autos MoMMediumUSD
13:30(United States) Durable Goods Orders Ex Transp MoMHighUSD
13:30(United States) Non Defense Goods Orders Ex AirLowUSD
13:30(United States) Durable Goods Orders MoMHighUSD
13:30(United States) Durable Goods Orders ex Defense MoMHighUSD
15:00(United States) Michigan Consumer ExpectationsLowUSD
15:00(United States) Michigan Current ConditionsLowUSD
15:00(United States) Michigan 5 Year Inflation ExpectationsLowUSD
15:00(United States) Michigan Consumer SentimentHighUSD
15:00(United States) Michigan Inflation ExpectationsLowUSD
16:00(Canada) Budget BalanceLowCAD
18:00(United States) Baker Hughes Oil Rig CountLowUSD
18:00(United States) Baker Hughes Total Rig CountLowUSD

Buy Scenario: - GBP/USD continues to trade near a two-month low as sellers test a short-term support line ahead of the significant UK Retail Sales data released early on Friday. Consequently, the British Pound is struggling to extend its three-day losing streak around the 1.2320-1.2315 range at the moment.
The upcoming UK Retail Sales report for April, which is expected to show a 0.3% month-on-month increase compared to the previous contraction of -0.9%, could potentially pose a challenge to the sellers of the GBP/USD pair, along with the support line that has been in place for the past two weeks and the nearly oversold reading on the Relative Strength Index (RSI) (14).
However, there is a downward-sloping resistance line from May 10, currently located around 1.2370, which could hinder any further recovery for the GBP/USD pair.
Even if the pair manages to surpass the 1.2370 level, the 50-day Moving Average (DMA) obstacle around 1.2435 may act as the final defense for the bears before giving way to the bulls. Till we do not advise to buy GBP/USD.

Sell Scenario: - On the downside, a decisive break below the immediate support line near 1.2300 could target the 100-day Moving Average (DMA) support around 1.2285.
Subsequently, a horizontal range consisting of levels observed since March 13 and the 61.8% Fibonacci retracement of the upward move from March to May, roughly positioned around 1.2190-1.2185 and 1.2140 respectively, might pose a challenge for the GBP/USD bears. Till then we do not advise selling GBP/USD.

Support and Resistance Level: -
S1 1.2291-R1 1.2370
S2 1.2260-R2 1.2418
S3 1.2211-R3 1.2449


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