The Sterling seen a large move up after UK retail sales increased more than expected in December. During the jump, the pound strengthened against 16 major peers. ““This is a strong economy and there will be buyers of sterling,” said Gavin Friend, a FX strategist at National Australia Bank Ltd. Retails heftily beat the .5 percent expectations with a 2.6 percent print. Neil Jones, head of Europeans hedge-fund sales at Mizuho Bank Ltd., said “I would expect only limited gains from here. However, improved domestic confidence expectations is a key pillar behind our long-term bullish sterling forecast.”
However, a point was made that the Sterling continues to appreciate due to the lack of global growth, and the Sterling has been a reserve currency in the forex realm, of sorts. However, the pound have pulled back roughly half of its data-related jump. The 4H chart shows the waning momentum in the ADX prior to the large jump, suggesting that there was not much conviction after the fact to keep it elevated. The price jump did break through the descending trend line starting at last Friday’s high. GBPUSD is finding support at 1.6400, where the 50 and 72 EMAs are layered. They should provide support for the rest of the week, while a further pullback into 1.638 is a possibility.
The weekly chart is interesting. There is a double bottom that lead into the current weekly uptrend in the pound-dollar last July at 1.4812. The parabolic move has resulted in a gain of roughly eight percent in the last seven months, but the trend looks to be weakening. The ascending trend line from that July low has been supporting price action higher, but the currently weekly candle pressed through to the downside. It is not indicting a down move, but it is just enough to make a trader wander about a downside move. The RSI, in the five-year weekly chart, has been topping out around 66, and it has currently ticked downward. Furthermore, the ADX and +DMI is head down, too.
Support currently resides at 1.6315, while solid resistance is at 1.6515. A close lower through support, and trend, could bring on 1.6175. Although, traders may want to keep Sterling above trend. A close above resistance, which has not happened yet, could sent GBPUSD to 1.6685.