GBP/USD better offered sub-1.3600, eyes on UK retail sales, Fed

The GBP/USD pair extends its side-trend into Europe, unable to take on the upside above 1.3600 levels, as the bulls remain on the back foot ahead of the UK retail sales and FOMC decision due out later this week.

GBP/USD: 1.3650 still on sight?

The spot continues to waver in a tight range below 1.36 handle in early Europe, extending its consolidative mode near fifteen-month tops of 1.3616. Cable rallied hard last week after the BOE signaled a rate hike could be sooner (than later), while hawkish comments from the BOE dove Vlieghe further fuelled the ongoing bullish momentum seen around the pound.

BOE Governor Carney noted at the BOE presser that the possibility of a rate hike had definitely increased, while BOE policymaker Vlieghe stated that the appropriate time for rate hike might be as early as in the coming months.

Moreover, dismal US retail sales data knocked-off the US dollar to five-day troughs against its main competitors, which collaborated to the strength in GBP/USD. The USD index now trades at 91.67, having reversed a dip to 91.59.

Looking ahead, markets eagerly await the FOMC policy decision for fresh direction on the spot and hence, all eyes will remain on the yield differential between the shorter duration Treasury yields and UK Gilt yields.

GBP/USD levels to consider             

Karen Jones, Analyst at Commerzbank, explained: “GBP/USD is approaching critical medium term resistance at 1.3622/70, which represents a double Fibo and the 2014-2017 downtrend. Given the convergence of resistance here we would expect this to hold the initial test. In order to alleviate immediate upside pressure the market will need to fall sub 1.3267 (August high).”