As markets anticipate the release of UK Retail Sales data, GBPUSD remains entrenched in a downtrend, with technical indicators signaling persistent bearish momentum. Despite a Hammer candlestick hinting at a potential reversal, the pair has struggled to sustain upward movement. Meanwhile, broader economic challenges, including stagnant growth and manufacturing sector declines, weigh heavily on the British economy. Traders are closely watching for signs of recovery or further downside risk as key support and resistance levels come into focus.
High Impact Economic Events
Friday 09:00 am (GMT+2) – UK: Retail Sales m/m (GBP)
Chart Analysis
Since peaking at 1.34332 on September 26, GBPUSD has been in a consistent downtrend, marked by lower highs and lower lows. The confirmation of a “Death Cross,” with the 20-period Exponential Moving Average (EMA) crossing below the 50-period EMA, accelerated bearish momentum, driving the pair to a low of 1.20987 on January 13. While a Hammer candlestick signaled a potential reversal, the market has struggled to sustain upward traction.
Momentum indicators remain aligned with the bearish outlook. The Momentum Oscillator remains below the critical 100 level, reflecting persistent downward pressure, while the Relative Strength Index (RSI) below 50 indicates continued selling dominance.
However, a positive divergence between price action and the Momentum Oscillator hints at a possible slowdown in the downtrend or a corrective move to the upside.

Key Resistance Levels
Should the buyers take market control, traders may direct their attention toward the four potential resistance levels below:
1.23516: The initial resistance level is established at 1.23516, which mirrors the trough from January 2.
1.24740: The second price target is set at 1.24740, representing the trough marked on December 20.
1.27065: The third price objective is observed at 1.27065, corresponding with the weekly resistance, R2, calculated using the standard Pivot Points methodology.
1.29207: An additional upside target is projected at 1.29207, mirroring the 61.8% Fibonacci Retracement drawn from the high point, 1.34332, to the low point, 1.20987.
Key Support Levels
Should the sellers maintain market control, traders may consider the four potential support levels listed below:
1.20987: The initial support level is seen at 1.20987, corresponding to the daily low recorded on January 13.
1.19371: The second support level is estimated at 1.19371, representing the daily weekly support, S2, calculated using the standard Pivot Points methodology.
1.18017: The third support level is identified at 1.18017, reflecting a trough marked on the weekly timeframe.
1.16287: An additional downside target is 1.16287, mirroring the 423.6% Fibonacci Extension drawn from the low low point, 1.23516, to the high point, 1.25750.
Fundamentals
The UK economy is stagnating, with minimal growth of 0.1% in November, driven by a decline in manufacturing despite growth in construction and services, according to the Independent. High energy costs and long-term structural issues have rendered British factories uncompetitive, with sectors like chemicals and steel particularly hard hit. Recent closures, such as Ineos’s synthetic ethanol plant and Mitsubishi’s Teesside facility, underscore the decline.
Experts cited by the Independent emphasize the need for a strategic overhaul, including lowering energy costs and prioritizing key industries like chemicals and steel. Without intervention, manufacturing’s contribution to the UK economy could decline further, jeopardizing stable, high-quality jobs and regional economic resilience.
Conclusion
GBPUSD remains under significant bearish pressure, with technical indicators and economic fundamentals aligning to reflect a challenging outlook. While a positive divergence hints at a potential corrective move, broader economic concerns, such as stagnant growth and a struggling manufacturing sector, continue to weigh on the pair. The release of UK Retail Sales data may offer fresh directional cues, but traders should remain cautious, keeping a close watch on key support and resistance levels to navigate potential volatility.