GBP/USD Test Key Support Ahead of Strong US Housing Market Data
Last Updated on July 20, 2021
GBP/USD Forecast – 20th July 2021
United States – Building Permits
On Tuesday, at GMT 12:30 p.m., the U.S. Census Bureau will publish the monthly Building Permits figure. It measures the changes in the total number of new permits issued for constructing new premises in the country.
Building permits are mandatory to start building construction. So, the number of new permits acts as a leading indicator of future construction activity in the country. Also, Forex traders in the United Kingdom consider that new constructions help energize the economy, as new buildings require materials from many other industries.
Last month, the number of new Building Permits came out at 1.68 million. Analysts were expecting it to come out at 1.69 million this month.
United Kingdom – Retail Sales
On Thursday, at GMT 11:00 a.m., the UK’s Office for National Statistics will release the month-over-month retail sales figure. It measures the change in the total value of sales made by the retail sector in the country over the past month. However, this is adjusted for inflation in order to offer an accurate overview.
CFD traders consider the UK’s retail sales figure to be one of the main gauges of consumer confidence. Because it makes up the majority of the overall economic activity in the country. Also, consumer spending is directly correlated with consumer confidence. So, it can signal future economic activity as well.
Last month, the value of the UK’s retail sales increased by -1.4%. Analysts are expecting it remains unchanged at 0.0%
Since March 2020, the GBP/USD remained a sustained uptrend. Over the last year, it has climbed up by around 2800 pips. After reaching the 1.4240 level on February 24, the GBP/USD started a bearish retracement. A month later, on March 24, it broke below the uptrend line and signaled a change in trend. Over the last few months, the GBP/USD mostly remained range-bound. During this time, it traded between the support around 1.3725 and the resistance near the 1.4240 level. Earlier today, it penetrated below the support near the 1.3725 level.
The UK’s retail sales will likely remain unchanged at 0.0%, which will have a neutral impact on the currency. By contrast, the US building permits figure will likely increase to an annualized 1.69 million. We believe it would set a bearish fundamental outlook for the GBP/USD this week. Therefore, if the GBP/USD closes below the support near 1.3725, it would likely attract additional bearish momentum in the market.
Hence, CFD traders should look out for trading opportunities below this major support level of around 1.3725.
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