Two trades to watch: GBP/USD, DAX

GBP/USD hovers around 1.38 despite weak retail sales, PMIs next

GBP/USD is holding steady after a brief move lower on Thursday. The pair is set to gain 0.4% across the week its third straight week of gains.

Whilst expectations of a rate rose by BoE have boosted GBP/USD across the week, the focus today is on economic data.

UK retail sales unexpectedly fell -0.2% MoM, vs 0.5% expected. Annually retail sales fell considerably more than forecast -1.3% vs -0.4%. The data suggests rising prices could be hitting demand

PMI data for both the US and the UK is also due. Expectations are for a slight move lower across he board. Although the gauges (services, manufacturing and composite) are all expected to stay comfortably above 50 – the level which separates expansion from contraction.

Where next for GBP/USD?

GBP/USD has been extending a bounce from the October low of 1.3412, GBPUSD has retaken the 50sma, its descending trendline and is trading shy of the 200 sma.

The RSI is supportive of further upside whilst it remains out of overbought territory.

A move above 1.3850 could cement the bullish bias and open the door to 1.3910 the September high.

Rejection at the 200 sma at 1.3808 could see the pair ease back towards the falling trendline at 1.3750.

Dax rises, PMI data due

The DAX along with its European peers, is moving higher on Friday amid risk on trade.

News that Evergrande has made an interest payment, narrowly avoiding default has boosted the mood in the market.

Attention today is firmly on PMI releases. German PMI data is expected to show that growth in both the manufacturing and service sector slowed in October. The manufacturing PMI will be particularly in focus after recent German industrial output data fell sharply amid the ongoing supply chain disruptions.

Eurozone composite PMI data, which is considered a good gauge for business activity is also expected to reveal a slight slowdown from 57.1 to 55.2 in October.

Where next for the DAX?

Having broken back above its descending trendline the DAX is consolidating the move. The DAX now trades caught between the falling trendline support and the 50 & 200 sma resistance around 15550/15600.

The RSI is very mildly bullish. Buyers would need to close above 15550/15600 to cement the bullish bias and look towards 16000 and fresh all-time highs.

Sells will be looking for a move below the falling trendline and the weekly low of 15400 to open the door towards 15280 and 14950

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