GBPUSD Rejecting the 1.56 Level + US Retail Sales Figures to be Key for USD Today

First up, the big data event of the day for the British Pound - inflation.

UK July Year-on-Year inflation comes in at 2.8 pct - matching median forecasts.

There was no reaction on the currency markets as is rightly the case when any figure comes in on target.

US Retail Sale Figures Ahead

Kathy Lien at BK Asset Management has described today's retail sales report as being exceptionally important:

"Consumer spending is the backbone of the U.S. economy but this month, the amount that retail sales increases plays a particularly important role in the Federal Reserve's monetary policy plans.  

"With only 5 weeks to go before the September FOMC meeting, every piece of data counts.  Including tomorrow's release, the Fed will have 2 retail sales reports on hand and another NFP number before they meet."

Consensus forecasts are for growth to be recorded at +0.3 pct, down on last month's +0.4 pct.

The technical outlook for the Pound versus US dollar exchange rate

Technical considerations continue to exert their power over the outlook for the US dollar and British Pound.

Kathy Lien at BK Asset Management says:

"The British pound continued to reject the 1.56 level by extending its losses against the greenback. The 1.56 level has been a significant inflection point for the GBP/USD and this week's top Tier UK economic reports will play a big role in whether this level is broken. We have data on Tuesday but Wednesday is the big day for sterling.  

"Aside from the country's employment report, the Bank of England minutes is also scheduled for release. The central bank left monetary policy unchanged but the main question is how many MPC members voted in favour of more asset purchases, if any at all AND how many members voted for the new unemployment rate threshold. If we learn that some members voted for additional asset purchases and the decision for an unemployment rate threshold was unanimous, the GBP/USD could experience additional losses.  

"However if no one favoured more QE and some members opposed the threshold, which was the BoE's attempt to stress their plans to keep monetary policy very easy for a very long time, the GBP/USD could break above 1.56."

ICN Financial Markets say:

"The pair’s move to the downside was due to failing to breach 78.6% correction forcing the pair to respond to overbought signals shown on momentum indicators. But stability above 1.5390 forces us to expect the return of the upside move today. A four hour closing below the referred to level could lead the pair for further bearishness.
The trading range for today is among key support at 1.5310 and key resistance at 1.5645.

"The general trend over short term basis is to the downside as far as areas of 1.5605 remains intact targeting 1.4550."

Luc Luyet at MIG Bank says:

GBP/USD has recovered strongly after meeting the 1.5102 low on 02/08/2013. The structure present since this date is suggestive of a further recovery leg higher and with this in mind the
minor set back that we have witnessed since the recent peak last Thursday is seen as a correction in a rising trend.

Thus focus turns to the multi-month falling channel that has contained trade for the last two years. A return to the resistance of this technical structure is now favoured, currently near 1.6150.