Current trend

During the Asian session, the GBP/USD pair is trying to retreat from the lows of May 17 and is testing the level of 1.2665 for a breakout, supported by British macroeconomic statistics.

Thus, the May retail sales increased from –1.8% to 2.9% MoM, although analysts expected only 1.5%, and from –2.3% to 1.3% YoY compared to forecasts of –0.9%. The core indicator excluding fuel increased by 2.9% MoM and 1.2% YoY, ahead of estimates of 1.3% MoM and –0.8% YoY. Investors were neutral when the Bank of England officials decided to keep the interest rate at 5.25%, with seven of the nine board members voting for it and two more calling for a cut. Meanwhile, the core consumer price index, excluding food and energy, was 3.5% YoY. According to experts, despite the weakening of medium-term inflation to 2.0%, which is already very close to the target level, the risks of its acceleration in the second half of the year remain, as low energy prices last year artificially restrained the upward dynamics of the indicator.

The American dollar is trading at 105.10 in USDX despite the weakening labor and real estate markets. Thus, initial jobless claims decreased from 243.0K to 238.0K, and the total claims reached 1.828M, higher than 1.813M previously. The May building permits adjusted by –3.8%, from 1.440M to 1.386M, and housing starts by –5.5%, from 1.352M to the August low of 1.277M.

Support and resistance

On the daily chart, the trading instrument is correcting, completing the development of a rare candlestick pattern, Three White Crows, which targets are almost reached.

Technical indicators reverse downwards: fast EMA on the Alligator indicator are approaching the signal line, and the AO histogram is forming correction bars, falling in the buy zone.

Resistance levels: 1.2700, 1.2850.

Support levels: 1.2640, 1.2510.

Trading tips

Short positions may be opened after the price declines and consolidates below 1.2640, with the target at 1.2510. Stop loss — 1.2720. Implementation period: 7 days or more.

Long positions may be opened after the price grows and consolidates above 1.2700, with the target at 1.2850. Stop loss — 1.2630.