GBP/USD Analysis: Once again fails ahead of 1.2300 mark, UK PMIs/US data eyed for fresh impetus

• GBP/USD struggled to make it through 50-DMA hurdle, despite some USD selling bias.
• BoE Governor Bailey left the door open for negative rates and took its toll on the GBP.
• Worsening US-China relations exerted some pressure on Thursday ahead of UK PMIs.

The GBP/USD pair continued with its struggle to make it through 50-day SMA hurdle and witnessed a modest intraday pullback on Wednesday. The British pound witnessed some selling following the release of softer-than-expected UK consumer inflation report, which showed that the headline UK CPI fell 0.2% MoM and eased to 0.8% YoY rate in April. However, some renewed US dollar selling bias assisted the pair to gain some positive traction. Despite fading hopes for a potential COVID-19 vaccine and worsening US-China relations, the upbeat market mood continued undermining the greenback's perceived safe-haven demand.

The pair, however, struggled to capitalize on the uptick and once again started retreating from the 1.2300 neighbourhood after the Bank of England Governor Andrew Bailey did not rule out the possibility of negative interest rates. Bailey, alongside three MPC members, was testifying before the Treasury Select Committee on the economic impact of the coronavirus. On the other hand, the USD bulls gained some respite following the release of the dovish sounding FOMC meeting minutes. The policymakers warned that the coronavirus pandemic posed both a severe economic threat and a risk to financial stability.

The pair ended the day with modest losses, snapping two consecutive days of winning streak, and witnessed some follow-through selling through the Asian session on Thursday. The US Senate passed a bill that could block some Chinese companies from selling shares on the American stock exchanges. This, in turn, fueled concerns over a further escalation in disputes between the world's two largest economies and weighed on investors' sentiment. The cautious mood was seen as one of the key factors that helped revive the greenback's relative safe-haven status and exerted some pressure on the major.

The pair weakened back below the 1.2200 mark as market participants now look forward to the release of flash UK Manufacturing/Services PMI for a fresh impetus. Later during the early North American session, the US economic docket – featuring the releases of Philly Fed Manufacturing Index, Initial Weekly Jobless Claims and Flash Manufacturing PMI – might influence the USD price dynamics and produce some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the pair’s inability to break through 50-day SMA barrier and the subsequent fall points to the re-emergence of selling pressure. Some follow-through weakness below the 1.2180-75 region will reinforce the negative outlook and turn the pair vulnerable to accelerate the fall further towards the 1.2100 round-figure mark en-route multi-week low near the 1.2075 region. A convincing breakthrough might be seen as a fresh trigger for bearish traders and set the stage for a further near-term depreciating move towards challenging the key 1.2000 psychological mark.

On the flip side, any meaningful positive move back above the 1.2200 mark now seems to confront some fresh supply near the 1.2260 horizontal level and seems more likely to remain capped ahead of the 1.2300 mark. Bulls are likely to wait for a sustained strength above the mentioned level before positioning for any further near-term appreciating move towards the 1.2340-45 supply zone.