Two trades to watch: GBP/USD, S&P500

GBP/USD falls after UK retail sales tumble

GBP/USD is falling -0.4% extending weakness from the previous session after dismal UK retail sales data.

Sales fell by much more than forecast in August, dropping -1.6% MoM in August, down from +0.3% in July and worse than the -0.5% decline expected.

Sales have been trending lower across the year and collapsed in August as the deepening cost-of-living crisis meant consumers cut back drastically. August was the sharpest decline in sales in 8 months, highlighting the extent of the squeeze on households.

Retail sales are set to be a drag on the economy in Q3, raising fears of a recession. Still, the data is not likely to change the stance of the BoE, which is expected to hike interest rates again next week, possibly by 75 basis points.

The USD rose yesterday following upbeat retail sales and jobless claims data. US consumer confidence will be a key driver for the greenback.

Where next for GBP/USD?

GBP/USD has been trading in a falling channel across the past 4-months, breaking down support after support. The RSI is below 50 but remains out of oversold territory, hinting to further downside.

Sellers need to break below 1.1406, the 2022 low, to head towards 1.1340, the falling trendline support.

Buyers will look to rise over resistance at 1.15 ahead of 1.1615 the 20 sma. It will take a move over 1.1740, the weekly high, to create a higher high.

S&P 500 futures extend declines ahead of US consumer confidence data

The US index fell 1.1% in the previous session after an unexpected increase in US retail sales and on signs of strength in the labor market as initial jobless claims fell for a fifth straight week. Strong data is proving to be bad news for stocks as it raises fears that the Federal Reserve will need to act more aggressively to take the heat out of the economy.

Attention is now on US consumer confidence is in focus and is expected to tick higher to 60, up from 58.3. The rise in confidence comes as fuel prices fall. Improved confidence often goes hand in hand with higher spending, which could attract the Fed’s attention.

Better than expected, consumer confidence could, like the strong data yesterday could, fuel hawkish Federal Reserve bets and drag stocks lower.

Where next for the S&P500?

The S&P 500 has broken below its rising trend line support, combined with the 20 sma crossing below the 50 sma, and the bearish RSI keeps sellers hopeful of further downside.

Sellers will look for a break below 3800 round number and May low ahead of 3715, the July low.

Buyers will look towards resistance at 4000, the psychological level, and 41250, the weekly high.