GBP/USD: Trading the British Retail Sales Jul 2013

British  Retail Sales is considered one of the most important indicator of consumer spending. The indicator’s release in the first week of each month provides analysts and traders with  an early  look at consumer spending. A reading that is higher than the market forecast is bullish for the pound.

Here are all the details, and 5 possible outcomes for GBP/USD.

Published on Thursday at 8:30 GMT.

 Indicator Background

Consumer spending is one of the most important components of the economy, and strong numbers in this sector signify growth and a stronger economy.

Retail Sales looked excellent in the June release, jumping 2.1%, which matched the sharpest gain seen in 2013. The reading easily beat the estimate of 0.8%. However, the markets are bracing for a much lower reading this time around, with an estimate of a weak 0.2% gain. Will the indicator surprise the markets with a strong reading?

Sentiments and levels

The pound  posted some strong gains last week,  but this was more a reflection of the broadly-based dollar rather than  newfound strength on the part of the pound.  We’ve seen the greenback rebound quickly in the past and some solid US numbers this week could  bolster the pound.  The UK economy remains fragile, and  will continue to be weighed down by tough austerity measures as the government tries to get its fiscal  house in order.  So, the overall sentiment is bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.5286, 1.5196, 1.5110, 1.5000, 1.4897 and 1.4781.

5 Scenarios

1. Within expectations: 0% to 0.4%: In such a case, the  pound is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.5% to 0.8%: An unexpected higher reading can send GBP/USD well above one resistance line.
3. Well above expectations: Above 0.8%: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.4% to -0.1%: A  decline in the release  could push GBP/USD below one level of support.
5. Well below expectations: Below -0.4%: In this scenario, the  pound  could fall  and break below a  second support level.

For more about the pound, see the  GBP to USD forecast.

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