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GBP/USD: Trading the British Retail Sales December 2012

UK  Retail Sales is considered one of the most important consumer indicators. This indicator provides analysts and traders with  an early  look at consumer spending. 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 Thursday at 9:30 GMT.

 Indicator Background

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

The November release was a major disappointment, with Retail Sales declining 0.8%, which was one of its worst performances of the year. The markets are expecting a turnaround in December, with a forecast of 0.3%. Will the indicator rebound into positive territory this month?

Sentiments and levels

The pound   continues to push hard against the US dollar,  and  took full advantage  of the  Fed’s announcement to implement Q4.  GBP/USD has posted an   impressive rally since mid-November, climbing over four cents. Will the rally continue? As we approach the end of 2012, the markets are now focused on the looming fiscal cliff crisis. It is likely that some kind of compromise or stop-gap measure will be reached on Capitol Hill. If the fiscal cliff can be averted or at least delayed, market sentiment would be positive, and this could bolster the pound. So, the overall sentiment is bullish on GBP/USD towards this release.

Technical levels, from top to bottom: 1.66, 1.6475, 1.6343, 1.6247, 1.6122 and 1.6060.

5 Scenarios

  1. Within expectations: 0% to 0.6%: In such a case, the  pound is likely to rise within range, with a small chance of breaking higher.
  2. Above expectations: 0.7% to 1.0%: An unexpected higher reading can send GBP/USD well above one resistance line.
  3. Well above expectations: Above 1.0%: 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 negative reading could push GBP/USD below one level of support.
  5. Well below expectations: Below -0.4%: In this scenario, the pair could  fall and could break a second support level.

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

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Kenny Fisher

Kenny Fisher

Kenny Fisher - Senior Writer A native of Toronto, Canada, Kenneth worked for seven years in the marketing and trading departments at Bendix, a foreign exchange company in Toronto. Kenneth is also a lawyer, and has extensive experience as an editor and writer.