Bearish Reversing Pattern Materializes in GBPUSD

GBPUSD has been finding resistance at the 100 weekly SMA, which stopped the upward momentum again this month, forming a bearish reversing chart pattern. Earlier today we had a round of economic data from the UK, including the Manufacturing and Services PMI numbers for June, as well as the Retail Sales report for May, but they chart setup remains unchanged.

UK retail sales were expected to turn positive in May after declining in April

GBP/USD has been on a strong upward trend for the past two months. However, recent developments have changed its course, leading to the formation of a bearish reversing chart pattern on the weekly timeframe. Following the hawkish FOMC meeting last week which sounded more hawkish than expected, and the BOE yesterday which gave a few dovish signals for the first time, the bearish reversing pattern is taking up shape.

GBP/USD Chart Weekly – The Stochastic Indictor Is OverboughtChart GBPUSD, W1, 2024.06.20 23:18 UTC, MetaQuotes Ltd., MetaTrader 5, Demo

In March the price pierced the 100 SMA (red) on the weekly chart, but reversed quickly back down and fell to the 100 SMA (green)  at 1.23 lows. In April GBP/USD reversed higher again and reached the 100 smooth MA (red) at the top. However this moving average continues to reject GBP/USD and now the price has fallen away from it, trading 200pips lower after several bearish candlesticks. The stochastic indicator is also overbought and reversing lower, which confirms the bearish reversal.

UK May Retail Sales Released by ONS – 21 June 2024

  • Monthly Retail Sales:

    • Actual: +2.9%
    • Expected: +1.5%
    • Prior: -2.3% (revised to -1.8%)
  • Yearly Retail Sales:

    • Actual: +1.3%
    • Expected: -0.9%
    • Prior: -2.7% (revised to -2.3%)
  • Retail Sales (excluding autos and fuel):

    • Monthly:
      • Actual: +2.9%
      • Expected: +1.3%
      • Prior: -2.0% (revised to -1.4%)
    • Yearly:
      • Actual: +1.2%
      • Expected: -0.8%
      • Prior: -3.0% (revised to -2.5%)

UK retail sales have finally surpassed expectations after being weak for a long time. While this is a significant achievement, it comes at a time when its impact on the Bank of England’s (BOE) forthcoming policy decisions is likely to be minimal. The Office for National Statistics (ONS) has also highlighted that the year-over-year comparisons should be viewed with caution due to the additional holiday at this time last year.

Examining the data more closely, there were increases in retail sales volumes across all major sectors. Food shop sales experienced a 1.2% rise, department store sales climbed by 1.7%, and sales at textile, clothing, and footwear stores saw a substantial increase of 5.4% over the month. These improvements indicate a widespread recovery in consumer spending across various retail categories, reflecting a more robust demand environment.

GBP/USD Live Chart

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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