The GBP/USD price analysis shows that the UK’s economic weakness has put the pound in a vulnerable position against the dollar. At the same time, market participants are looking forward to Trump’s inauguration next week, which will shape the outlook for the US economy. 

Data on Friday showed that retail sales in the UK unexpectedly fell in December. Sales dropped by 0.3% when economists had expected a 0.4% increase. The decline indicated weak consumer spending during the month, likely putting more pressure on the Bank of England to lower borrowing costs.

The soft sales figures came a day after data showed a smaller-than-expected expansion in the UK economy. Recent economic reports have dimmed hopes of a stronger economy under the new administration. Moreover, it has increased BoE rate cut expectations, weighing on the pound. 

Meanwhile, the dollar eased slightly after Thursday data showed a smaller-than-expected retail sales increase. Sales increased by 0.4% on a monthly basis compared to forecasts of a 0.6% increase. However, all focus is on Trump’s inauguration next week. Experts believe it will mark a big shift leading to a period of robust economic growth and higher inflation. Traders will wait to see whether he will implement his policy proposals.

GBP/USD key events today

Neither the US nor the UK will release any significant reports. Therefore, traders will keep absorbing the UK retail sales report.

GBP/USD technical price analysis: Bears set sights on the 1.2102 support level

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GBP/USD 4-hour chart

On the technical side, the GBP/USD price is on the verge of breaking below the 30-SMA after a recent rebound to the 1.2250 resistance level. Despite the break above the SMA, the bearish bias remains strong. Moreover, the RSI trades below 50, suggesting strong bearish momentum. 

Additionally, the price trades in a bearish channel and might bounce from the channel resistance to retest the channel support. Therefore, GBP/USD might soon break below the 1.2102 support level to continue the downtrend. 

However, bulls might break above the channel resistance if the SMA holds firm. Such an outcome would suggest a bullish shift in sentiment, allowing the price to reach the 1.2400 resistance level.

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