Cable falls as UK retail sales data disappoints

The cable declined as the UK retail sales increased sharply in June. Data from the British Retail Consortium (BRC) showed that retail sales declined by -1.6%. This was worse than the expected decline of -1.5%. It was also the third straight month of declines. The cable also declined as tensions between the US and UK continued following the UK ambassador leaks. In the leaks, the ambassador accused the Trump White House for being dysfunctional and inept. In response, Donald Trump said that the US will not deal with the ambassador. He is therefore expected to be replaced when the next prime minister comes to power.

The euro declined to a three-week low against the dollar as investors started to price-in a more dovish European Central Bank (ECB). Two weeks ago, Mario Draghi said that the bank will do whatever it could to support the economy. As a result, investors expect the bank to restart the Quantitative Easing program that was ended in December. Today, data showed that the Italian retail sales declined by an annualized rate of -1.8% in May. This was lower the expected gain of 3.8%.

Global stocks declined today as investors waited for a statement from Fed chair, Jerome Powell. The Fed will testify before congress on the status of the economy and what it plans to do on rates. This will be the first time he talks after the June jobs numbers, which were released on Friday last week. In Germany, the DAX declined by more than a percentage point as investors continued to worry about Deutsche Bank and BASF. In the US, Dow and S&P 500 futures point to an 88 and 10-point decline.

EUR/USD

The EUR/USD pair declined to a three week-low of 1.1192. On the chart below, this price is below the 25-day and 50-day moving averages. The RSI has remained relatively lower while the price is along the lower line of the Envelopes indicator. The pair could continue moving lower to test the important support level of 1.1180.

GBP/USD

The GBP/USD pair continued to decline to the lowest level since January this year. The pair is now trading at 1.2438. On the four-hour chart, the pair is below the 50-day and 25-day moving averages. The RSI has moved to the oversold level of 17. The Bears Power indicator has continued to decline. The pair could continue declining ahead of the UK GDP numbers expected tomorrow.

USD/JPY

The USD/JPY pair reached a three-week high of 108.95. This was a continuation of the upward rally that started on June 24 when the pair reached a low of 106.75. On the four-hour chart, the price is along the upper line of the Bollinger Bands while the RSI has moved to the overbought level of 70. The price is along the 38.2% Fibonacci Retracement level. The pair will likely continue moving up to test the 50% Fibonacci Retracement level of 109.58.