VOT Research Desk
Market Analytics and Considerations
Positive retail sales (MoM) are masked by ongoing volume losses in purchases. The GBP/USD exchange rate is still high, above the 200 DMA yet below the psychological zone of 1.200.
Next week’s economic schedule seems to be rather light, offering little opposition to the present short-term trend.
UK retail sales increased by 0.6% in October compared to September, however this increase was overshadowed by declines in volume purchased. Even if that data alone sounds relatively encouraging, year by year throughput fell significantly by 6.1% when contrasted to October of 2021.
Food was the biggest underperformer for the October report according to the ONS UK retail sales report, with volumes declining 0.4%. However, it was more than made up for by favorable ratings from non-food stores, non-store retailing, and food.
Reduced real household income, which the Office for Budget Responsibility (OBR) predicts would fall by 7% over the next two years and effectively return households to 2013 levels, is the main challenge facing UK consumers this year and into the following year.
The following figure highlights the general retail pattern of dropping sales volumes ever since the peak in the spring of 2021, indicating that the upcoming holiday season is expected to be more subdued.
Source: ONS (Office for National Statistics)
TECHNICAL FACTORS FOR GBP/USD
Before reaching that psychologically significant 1.2000 level, the daily chart shows a period of stabilization during which a bullish flag appears to be emerging. A hold above 1.2000 may portend more bliss for the pound relative to the dollar, according to the pennant, which is typically interpreted as a positive indication. In such a scenario, a stay above 1.2000 following a retracement that would bring the next zone of resistance, 1.2300, into focus would be the genuine test of the potential bullish continuation.
Cable is supported by trendline support (previous trendline resistance), the 1.1685 trough from 2016, around 1.1410.
COT Perspective
|
CHANGE IN |
LONGS |
SHORTS |
OI |
|
DAILY |
-4% |
-1% |
-2% |
|
WEEKLY |
-6% |
6% |
0% |
