GBP/USD Outlook: Sterling Is At A Crossroads As Weak Data Hurt Bulls

Technical analysis of Forex market

Cable pulled back from new high in early European trading on Friday, pressured by weaker than expected UK data which showed weak recovery in retail sales in December after November’s plunge on lockdowns and downbeat PMI’s, as services sector was hit much more than expected and activity in manufacturing sector also slowed in January

Sterling is at the crossroads, with mixed fundamentals keeping both, negative and positive scenarios on the table.

Thursday’s jump to new highest since Apr 2018 and new 2021 high (1.3745) and eventual close above 1.3700 barrier after several attacks was a positive signal, with accelerated UK vaccination and expectations from President Biden’s economic plan to boost the sentiment and contribute to pound’s strength.

On the other side, weak retail economic data, fears that the UK government may further extend the lockdown until summer and concerns about approval of the US stimulus package may sour the sentiment and increase pressure on sterling.

Technical studies remain supportive, with rising daily moving averages in bullish setup and tracking the advance and rising bullish momentum.

Fresh weakness approaches initial support at 1.3632 (10DMA), violation of which would soften near-term tone, but close below rising 20DMA (1.3601) which tracks the advance for the past one month, would generate stronger negative signal and risk deeper fall.

Res: 1.3717, 1.3745, 1.3784, 1.3829.
Sup: 1.3632, 1.3601, 1.3573, 1.3542.