GBP/USD Technical Analysis

The Pair fell sharply yesterday following an unexpected fall in UK retail sales, but recovered most losses in the U.S. session. Seasonally adjusted retail sales fell 0.6% in May, below market expectations for sales to increase by 0.5%. On a separate report, the Confederation of British Industry (CBI) said manufacturing conditions remained tough in June as exports orders continue to weaken. The CBI industrial survey came in at -51%, compared to -56% in May. The outlook for economic recovery is mixed, however most analysts point to growth by the end of the year or early 2010.

Looking at the 4hour chart, GBP/USD continues to show both strong supply and demand levels. near its 38.2% Fib retracement level at 1.6450 (supply) and 1.6200 area as support. Wall Street performance should be key for the pair's next move as it could benefit from risk appetite; however, yesterday's session proved little as far as price action. The next level of resistance lies at 1.6454, followed by 1.6510 and 1.6600.