UK retail sales data showed staggering growth. The retail sales volumes jumped by 9.1% in January following a revised 1.7% decline in December. Oddly enough, the pound sterling remained flat after the release of the report.
At the end of the day, it even decreased slightly. So, the British currency is losing steam. To resume a steady rise, it needs new drivers, for instance, key rate hikes by the Bank of England. However, judging by the comments of BoE policymakers, the bank has already changed all the necessary parameters of monetary policy.
Earlier, the regulator announced two rate hikes before the end of the year. It voiced its plan prior to the rate hikes in December. Therefore, the Bank of England should indicate its intention to tighten monetary policy once again.
The Federal Reserve is planning at least three rate increases. It means that by the end of this year, the greenback may benefit from the difference in interest rates. The pound sterling is unlikely to climb until the Bank of England provides hints about the possibility of rate hikes. Today, trading activity is likely to be sluggish because of the public holiday in the US.
The pound sterling is trading within the sideways channel. It means that traders are not ready for a trend reversal. The target levels are located at 1.3480 and 1.3630. Should the price hold at one of these levels on the 4H chart, it will signal the breakout from the sideways channel. Until then, the pound sterling will keep trading flat.
The RSI indicator is moving above the 50/70 line on the 4H chart, which indicates a growing volume of long positions. On the short-term timeframes, the pound sterling is overbought due to the stagnation in the market.
At the same time, the Alligator indicator gives a buy signal on the 4H chart. However, this signal is rather dubious as the moving averages are located within the boundaries of the sideways channel.
Outlook
Currently, traders are focused on the price fluctuations within the upper boundary of the sideways channel. If the price consolidates above 1.3630 on the 4H chart, it may break out of the flat range and resume an upward movement.
As a result, it may approach the January high. If the price settles below 1.3570 on the 4H chart, it is likely to stay in the range of 1.3500 - 1.3600. As for complex indicator analysis, it gives a buy signal on the short-term and intraday charts amid the price movement within the upper limit of the sideways channel.
