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Pound after UK Retail Sales miss

Market Analysis

GBPCAD, H4

Even though today markets’ focus is the European Presidential election in France on Sunday, today’s data releases seem to affect the European markets, with the recent Eurozone PMI and UK retail sales releases. Eurozone April PMIs stronger than anticipated, seems that gave a tiny breath to Euro. However, immediately after UK Retail Sales released, Euro and pound drifted sharply down, with EURUSD low at 1.0696 and GBPUSD low at 1.2780.

The Eurozone manufacturing reading rose to 56.8 from 56.2 and the services reading to 56.2 from 55.9, leaving the composite at 56.7, up from 56.4 in the previous month. On the other hand, UK March retail sales were disappointing since fell more than expected, by 1.8% m/m, reversing the 1.7% m/m growth seen in February. In the three months to March, sales fell 1.4% q/q, which is the first quarterly decline since 2013. The ONS stats office pointed to higher prices as being the main culprit. The private BRC retail sales survey for the same month, released last week, showed the biggest quarterly decline in almost six years. The data suggest that the declines in sterling since mid-last year is starting to have consequences, in terms of higher prices

Consequently, GBPCAD pair could not stay unaffected after unexpected Retail Sales, by drifting to a new low for the day at 1.7205. The pair presents a downward trend after yesterday clocking a year peak at 1.7339. The 4-hour chart is showing bearing signs with the pair looking overbought. The four down consecutive down candlesticks and RSI at 72, suggest in theory that there may be more scope for the decline. Additionally, the short term MACD (5,8,3) has crossed down the 0 line.

Hence, the 4-hour chart in the GBPCAD prompted a SHORT position with an entry at 1.7238. Based on a 14 period ATR number, target was set at 1.7180, which is week’s low. Target 2 is at 1.7140 which is the confluence of the 23.6 Fibonacci level. Resistance is at 1.7350, while support was set at 1.7100 which is close to 38.2 Fibonacci level.

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Andria Pichidi

Market Analyst

HotForex

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