- US Dollar extends gains on a quiet American session ahead of holidays.
- Cable falls under 1.3000, to test March lows.
The GBP/USD pair dropped further during the American session on the back of a stronger US dollar across the board. The greenback started to rise over the European session amid global growth concerns and gained strength following the release of better-than-expected US economic data.
Upbeat US data and Kaplan
Retail sales rose 1.6% in March in the US surpassing expectations of a 0.9% gain. “After rising at a 2.5% pace in Q4, consumer spending is poised for a slowdown in the first quarter. However, the better-than-expected 1.0% increase in control group sales in today’s report feeds into the calculation in the GDP report and suggests a more modest slowing than anticipated by many forecasters”, said Wells Fargo analysts. In another report, initial jobless claims dropped for the fifth-week in-a-row, to a fresh 50-year low. On the negative front, the preliminary Markit PMI showed lower than expected numbers.
Dallas Federal Reserve Bank President Robert Kaplan said he is getting more confident about the growth outlook for the current year as confidence in growth is firm and has been building. He highlighted a tight job market and a strong consumer. On the international front, mentioned he is less worried about China but warned Europe is still decelerating.
The US dollar kept rising at a modest pace and GBP/USD fell to 1.2977, the lowest level in almost three weeks and very close to the March low at 1.2960. As of writing, was hovering around 1.2980/85, holding below the 1.3000 zone, on its way to the lowest close since mid-February. The US Dollar Index was up 0.45%, at 97.45, trading at the highest since April 5.
GBP/USD Technical outlook
Valeria Bednarik, Chief Analyst at FXStreet notes that the GBP/USD pair is breaking below a daily ascendant trend line coming from March low at 1.2959. “With the line currently at around 1.3000, offering an immediate short-term resistance.”
The pair may attempt to recover the 1.3000 level, yet if it fails, lower lows are likely in the following sessions, says Bednarik. He sees next support levels at 1.2960, 1.2920 and 1.2875.