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Bears pause as weak UK retail sales lift pair

by SuperiorInvest


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  • The EUR/GBP pair is trading at 0.8584, recording a 0.30% gain, indicating a break in bearish momentum.
  • Weak UK retail sales data for December give reasons for easing sticky inflation.
  • The overall trend for the cross is still tilted downward.

In Friday’s session, EUR/GBP the pair was spotted at 0.8584 and gained 0.30%. After two consecutive days of losses, a neutral to bearish outlook remains on the daily chart as the bears take a break. However, there is a change of scenery on the 4-hour chart with the bulls stating their momentum.

On the fundamental side, sterling is experiencing a significant sell-off following the Office for National Statistics (ONS) report of a sharp fall in December retail sales. Sales excluding fuel fell 3.3%, well below expectations for a 0.6% decline. In addition, the measure, which excludes fuel, decreased by 2.1%, compared to a forecast increase of 1.3%. This unexpected fall in retail sales, including a 3.2% month-on-month drop in store sales, is likely to weigh on the outlook for persistently high inflation, which may prompt the Bank of England to consider an earlier rate cut. In this sense, if hawkish bets begin to ease, the GBP may find further downside.

Technically speaking, the pair’s current position below the 20, 100 and 200-day simple moving averages (SMA) sends a clear signal that sellers have the upper hand in the broader market outlook. The negative slope of the Relative Strength Index (RSI), although in negative territory, suggests a hint of upside momentum, but it may not be enough to overturn bearish sentiment. Additionally, the flat red bars of the Moving Average Convergence Divergence (MACD) indicate a stalemate between buyers and sellers, cementing bearish control over the pair’s direction. Furthermore, the bears appear to have stalled after two days of significant losses, underscoring the short-term bearish view.

Shifting the focus to short-term dynamics, the 4-hour chart presents a somewhat different scenario. Here, although the RSI is still climbing within negative territory, the bulls’ accumulated momentum may trigger a bout of buying pressure, while the flat red bars of the MACD also indicate that the bears have taken a breather.

EUR/GBP technical levels

EUR/GBP daily chart

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