GBP/USD Forecast: Sterling Targets 1.3325 As Upmove Triggered By UK Retail Sales Continues

• Sterling rose to a 2-month high boosted by the UK retail sales data and general Dollar weakness with the unofficial Brexit summit ahead in Salzburg, Austria.
• Sterling is expected to test the 1.3325 level representing 38.2 percent Fibonacci retracement of the slide from 2018 high.

The GBP/USD is trading up 0.9 percent on a day at around 1.3270 after the UK retail sales report exceeded the market estimates rising both on total and core retail sales basis by 0.3 percent m/m in August. The headline UK retail sales rose 3.3 percent over the year in August while core retail sales stripping the consumer basket off motor fuel sales increased 3.5 percent over the year. 

After rising above a 100-day moving average of 1.3175 and breaking yesterday's high of 1.3215, Sterling is expected to test the 1.3325 level representing 38.2 percent Fibonacci retracement of the slide from 2018 high of 1.4377 to a low of 1.2662

The key political event on Thursday is the unofficial summit of the European Union leaders with the UK Prime Minister Theresa May over the Brexit deal that is not expected to deliver much according to former Brexit minister David Davis.

The GBP/USD rose to 1.3206 in the knee-jerk reaction to the UK retail sales report and returned back above the upward rising trendline and continues in the upward trajectory. The GBP/USD was similarly boosted on Wednesday -week high of after the UK inflation rose above expectation reaching a fresh 7-week high of 1.315, but retreated lower on rumors of the UK Prime Minister Theresa May expelling the proposal from the EU chief Brexit negotiator Michel Barnier on new Irish border setup.

The Salzburg meeting is though expected to generate further Brexit deal related headlines with negative news seen having a negative effect of GBP/USD as the market is becoming more sensitive to Brexit news than to UK macro data with the uncertainty surrounding the Brexit deal itself.

Technically, the GBP/USD has moved back to the upward trend after the UK retail sales related boost. After breaking above 23.6 percent Fibonacci retracement of the slide from 2018 high of 1.4377 to this year´s low of 1.2662, the GBP/USD continues to rise toward 38.2 percent Fibonacci retracement at 1.3325.  The technical oscillators including the Relative Strength Index and Slow Stochastics are both pointing upward on a daily chart, with Slow Stochastics in the overbought territory. 

GBP/USD daily chart