GBP/USD: Trading the British Retail Sales Oct 2013

British  Retail Sales is considered one of the most important consumer spending indicators and is often a market-mover.  A  reading that is higher than the market forecast is bearish for the US dollar.

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

Published on Wednesday at 08:30 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.

After three consecutive gains, Retail Sales disappointed in August, posting a decline of -0.9%. This was well below the estimate of 0.4%. The markets are expecting a turnaround  in September, with an estimate of a 0.5% gain. Will the indicator follow the prediction and post a gain this month?

Sentiments and levels

The pound enjoyed an excellent rally in September, but October has been a different story, as the currency struggles around the 1.60 line. GBP/USD  has been very calm over the past week,  but that could change as we get very close  to the debt ceiling. If, as expected,  Congress manages to reach an agreement over the debt  ceiling and the shutdown,  the dollar should gain ground. So, the overall sentiment is  bearish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.6247, 1.6125, 1.6000, 1.5936, 1.5832 and 1.5752.

5 Scenarios

1. Within expectations: 0.4% to 0.8%: In such a case, the  pound is likely to rise within range, with a small chance of breaking higher.
2. Above expectations: 0.9% to 1.3%: An unexpected higher reading can send GBP/USD well above one resistance line.
3. Well above expectations: Above 1.3%: Such an outcome would propel the pair upwards, and a second resistance line might be broken as a result.
4. Below expectations: -0.1% to 0.3%: A negative reading could push GBP/USD below one level of support.
5. Well below expectations: Below -0.1%: In this scenario, the  pound will fall and could break a second support level.

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

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