GBP/USD – Pound Continues Slide as US Retail Sales Edges Up

 After losing over two cents last week, GBP/USD continues to point downwards as we start the new week. The pair is testing the 1.53 line in Monday’s North American session. In economic releases, RICS House Price Balance is the only British release on Monday. The markets are expecting the housing indicator to climb 2%. If the estimate proves correct, this would be the first gain by the index in over three years. In the US, retail sales numbers were not very exciting. Core Retail Sales posted a second straight decline, as it fell by 0.1%, matching the forecast. Retail Sales fared slightly better, jumping from -0.4% to 0.1%. This beat the estimate of -0.3%

After a bad streak in April, we are seeing better numbers out of the US, notably employment figures. This has raised speculation that the Fed might adjust or even terminate its QE program, in which it buys $85 billion in assets every month. Terminating the QE program is dollar positive, and the US dollar was broadly stronger against all the major currencies on Friday. The markets will be looking for any clues as to the Fed ending QE, which would likely push the dollar higher.  

 The US dollar has also posted sharp gains against the euro, as the continental currency has lost close to two cents against the dollar since Thursday. Remarks by ECB member Ignazio Visco that the ECB is considering negative deposit rates hurt the euro, as this would lead to the flow of funds out of the Eurozone. The ECB would be the first major central bank to adopt negative deposit rates. Supporters of the idea argue that it would boost lending to businesses and help increase economic activity in the struggling Eurozone.

GBP/USD for Monday, May 13, 2013

GBP/USD May 13 at 15:10 GMT

GBP/USD 1.5314 H: 1.5385 L: 1.5314

GBP/USD Technical

GBP/USD has edged lower on Monday, and is struggling to stay above the 1.53 line. The pair faces resistance at 1.5432. This line has strengthened as the pair trades at lower levels. This is followed by resistance at 1.5524. On the downside, the pair is putting pressure on 1.5309. We could see this line break if the pound continues to lose ground. This is followed by a support level at 1.5203, which is protecting the 1.52 level.

• Current range: 1.5309 to 1.5432

Further levels in both directions:

• Below: 1.5309, 1.5203, 1.5111 and 1.5047
• Above: 1.5432, 1.5524, 1.5630 and 1.5695

OANDA’s Open Positions Ratio

GBP/USD ratio is pointing to strong movement towards long positions. This is not reflected in the current movement of the pair, as the pound has resumed its losing ways against the US dollar in Monday trading. However, this could be an early indication that the US rally will soon end and the pound will stop its slide and move upwards.

The pound has taken a tumble, losing over two cents since Thursday. With no major releases out of the US or UK on Tuesday, we could see the pound settle down and stay close to the 1.53 line. 

GBP/USD Fundamentals

• 12:30 US Core Retail Sales. Estimate -0.1%. Actual -0.1%
• 12:30 US Retail Sales. Estimate -0.3%. Actual 0.1%
• 14:00 US Business Inventories. Estimate 0.3%. Actual 0.0%
• 23:01 British RICS House Price Balance. Estimate 0.0%

*Key releases are highlighted in bold

*All release times are GMT

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