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The volume of retail sales in the UK jumped by 0.6%, far better than 0.1% that was predicted and double last month’s 0.3% rise. This surprise pushes GBP/USD higher – from 1.47 to 1.4740 after the release.

Retail sales often reflect consumer confidence – when consumers feel confident about the economic situation, they spend more at stores. This isn’t the only good sign in Britain this week:

This surprise joins the great employment figures we’ve seen yesterday. The number of people claiming unemployment benefits dropped by over 30,00, better than expected. Also the unemployment rate surprised with a drop from 8% to 7.9%.

Inflation continues to play a role, remaining above the government’s target, although it hasn’t been as strong as expected – CPI is at an annual rate of 3.4% at the moment – expectations were for 3.5%. Nevertheless, the level of inflation still puts pressures for a rate hike. Mervyn King dismissed the inflation and is waiting for it to go down.

GBP/USD has been struggling with the critical 1.4780 line for a few days, and could make another attempt to break above this line following the retail sales release.

Another attempt to break above 1.4780 will find resistance at 1.5050. Higher, 1.5130 was a support line when the Pound was trading at a higher range, and now serves as resistance. It’s followed by 1.5350, which was a pivotal line, and then by 1.5530, the highest level in recent months.

Below, 1.4610 provides immediate support. It capped the Pound a few times in recent weeks. It’s followed by 1.45 and 1.44, which was also a line of support in the past. The year-to-date low of 1.4227 is quite far at the moment

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