English double decker bus crossing the streets of Camden Town. Image source: Abel Roman © 123RF.com
The British pound is reeling against the dollar on the prospects of FED tapering by the end of the year or early 2021. In our last analysis of GBPUSD, we study just how low the pair could sink before the sterling can recuperate.
The British retail sector contracted last month because of the easing of pandemic restrictions by the government. Lockdown-triggered demand fell considerably, which contributed to a 2.5 per cent contraction in the retail sector. Similar tendencies were observed in the U.S. as well.
This performance signals that the recovery momentum in Britain is slowing down, which has added to the pains of the pound in the short term.
GBPJPY 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
As can be seen on the 4H chart above, the GBPJPY pair finds itself in a new downtrend. The latter was initiated following the completion of a major Double Top, a type of pattern that entails likely bearish reversals.
The underlying bearish momentum has been rising steadily over the last several days, as underpinned by the MACD indicator. This trend is likely to continue in the near future as the price action heads towards the closest swing low.
Following the recent pullback to the 20-day MA (in red) from the 61.8 per cent Fibonacci retracement level at 150.387, taking the form of a Dead Bounce Cat pattern, the price action is now ready to resume heading lower.
The next major target for the downtrend is underpinned by the 1.272 Fibonacci extension level at 147.123. However, before it falls there, the price could establish another minor pullback. This time from the last swing low at 148.500.
The pullback is likely to reach the 61.8 per cent Fibonacci, which is currently converging with the 20-day MA, from below.
The largest decline in retail sales since January
UK MoM Retail Sales. Image source: TradingEconomics.com
The consensus forecasts were projecting no likely changes in the index from a month prior. Retail sales had increased moderately by 0.2 per cent in June. However, the Office for National Statistics in the UK's survey showed that retail sales dove by 2.5 per cent.
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