GBP / USD updates session highs, expects a move above 1.4100 after US retail sales.

• The USD’s renewed selling bias helped GBP / USD regain positive traction on Friday.
• Weaker US retail sales report, falling US bond yields weighed heavily on the dollar.
• The lack of a solid follow-up buy warrants bullish traders’ caution.

The pair GBP/USD updated daily highs in reaction to weaker US retail sales figures, and the bulls are now expecting a sustained move past 1.4100.

The pair managed to regain positive traction on the final trading day of the week and take advantage of the overnight rebound from the key psychological level 1.4000. The rally was solely sponsored by the emergence of some new selling around the US dollar, which was being hit by falling US Treasury yields amid dovish Fed expectations.

Intraday USD sales accelerated during the early days of the US session, following the disappointing release of US monthly retail sales figures for April. In fact, top sales were largely unchanged during the reported month, marking a sharp slowdown from March’s upwardly revised reading of 10.7% (previously estimated 9.8%).

Added to this, sales excluding cars decreased 0.8% month-on-month in April and the closely followed Retail Sales Control Group also failed to meet market expectations, reaching -1.5% compared to consensus estimates for growth of 0.7 % and -0.2%, respectively. The data reaffirmed the Fed’s dovish view and forced investors to cut their bets for a tightening earlier than expected.

Despite the support factor, the GBP / USD struggled to capitalize on the move beyond the 100 hourly SMA. This, in turn, warrants some caution for bullish traders and makes it prudent to wait for some solid follow-up buying before positioning for any further appreciation moves.

Technical levels