Global macro overview for 25/01/2016:
The last month of the year is usually highly correlated with increases in sales as the Christmas holiday shopping spree is wildly-known customer behavior. Nevertheless, the last week's retail sales data from the UK was quite worse than analysts had expected. The December 2015 was disappointing for the British retailers who unexpectedly saw a 1% drop in overall sales instead of a healthy increase. Two main reasons might lie behind the drop in sales. First one is the ongoing flood and warm weather in the UK, which keeps customers away from stores and is directly causing people to buy less clothes and shoes. The second reason might have even more long-term consequences as more people are now shopping online hence a need for traditional shops is slowly decreasing. However, the main question is whether this drop in sales is the beginning of the longer-term decline in spending in the European second largest economy or if this is just a seasonal correction towards the norm. We will have to wait for another data release to draw any meaningful conclusions.
In the mean time, let's take a look at the technical picture of the GBP/USD pair. On the weekly chart, we can see a doji/hammer candlestick pattern after the end of the downtrend. This pattern might suggest it is time for a bounce or even trend reversal. This possibility is supported by the price behavior in the lower time frame: on the H4 chart, the price is now testing the support at the level of 1.4218 and in case of a success, we might see another attempt to break above the resistance level of 1.4360.