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  • GBP/USD struggles to capitalize on its intraday bounce from the post-UK jobs data low.
  • The US Retail Sales fail to impress the USD bulls or provide any meaningful impetus.
  • The fundamental/technical setup warrants some caution for aggressive bullish traders.

The GBP/USD pair witnessed good two-way price swings on Tuesday and now seems to have stabilized around the 1.2500 psychological mark, nearly unchanged for the day. Spot prices hold steady during the early North American session and move little following the release of the US macro data.

The US Census Bureau reported that the headline US Retail Sales rose 0.4% MoM in April as compared to consensus estimates for a reading of 0.8%. Meanwhile, sales excluding automobiles registered a modest 0.4% growth during the reported month. The data does little to impress the US Dollar (USD) bulls or provide any meaningful impetus to the GBP/USD pair. Against the backdrop of concerns about the US debt ceiling, reviving safe-haven demand leads to a modest downtick in the US Treasury bond yields and undermines the Greenback, which, in turn, lends support to the major.

That said, the overnight hawkish remarks by several Federal Reserve (Fed) officials warned on Monday that interest rates could still rise further amid relatively high inflation and a robust labor market. This could act as a tailwind for the US bond yields and limit the downside for the USD. This, along with expectations that fewer rate increases by the Bank of England (BoE) will be needed in coming months to bring down inflation, caps the upside for the GBP/USD pair. The speculations were fueled by the rather unimpressive UK monthly employment details released earlier this Tuesday.

In fact, the UK Office for National Statistics (ONS) reported that the number of people claiming unemployment-related benefits rose by 46.7K in April, more than the 26.5K seen in March and well above estimates for a fall of 10.8 K. Furthermore, the jobless rate ticked higher to 3.9% from 3.8%, suggesting that the flatlining economy has started to take a toll of Britain’s labour market. Additional details of the report showed that UK Average Earnings excluding bonuses rose by 6.7% in the quarter to March, softer than the 6.8% expected, though slightly higher than February’s 6.6%.

The aforementioned fundamental backdrop warrants some caution for aggressive bullish traders and before positioning for an extension of the GBP/USD pair’s overnight goodish rebound from the 1.2445-1.2440 region, or a three-week low. Even from a technical perspective, last week’s break below a short-term ascending trend channel suggests that the path of least resistance for spot prices is to the downside.

Technical levels to watch