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GBP Softens Following Weak UK Retail Sales, USDCNH Recovers

FOREX
  • GBP has traded on a softer note since the weaker set of July retail sales data. Cable remains around 0.2% lower on the session but has yet to test Thursday’s low print of 1.2703. The trend direction for GBPUSD remains down with the Aug 14 low of 1.2621 marking the short-term bear trigger.
  • GBPJPY was the early notable mover, registering losses of 0.60% at its lowest point, having snapped an eight-day winning streak on Thursday. However, the pair has since bounced back above the 185 handle and remains just moderately lower on the session.
  • Early JPY strength was a key feature of the session, amid weakness across European equity markets. USDJPY fell just shy of testing the initial support which lies between 145.07-11, a key pivotal area that after breaking earlier this week, provoked an impressive rally to yesterday’s 146.56 high print.
  • Since then, a general bid for the greenback has seen USDJPY bounce around 45 pips to 145.60 as of typing, reinforcing the technical uptrend that remains intact, with short-term pullbacks considered corrective at this juncture. Topside focus is on 147.49, a Fibonacci projection.
  • Coinciding with the stronger dollar, USDCNH has extended its recovery from the overnight lows of 7.2825, now trading in positive territory above 7.31. This follows China delivering its strongest ever pushback against a weaker yuan via its daily reference rate for the managed currency, as it seeks to restore confidence to a market spooked by disappointing data and heightened credit risks.
  • There was no reaction to the final Eurozone data which were in line with expectations for unchanged main aggregate measures. September ECB hike pricing steady at 13bp and the general greenback bid in recent trade sees EURUSD hover at session lows of 1.0864. There are no further major data releases this week.
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