GBP/USD forecast: Gearing up for some near-term short-covering bounce
|- Growing fears of a no-deal Brexit continue to weigh on the British Pound.
- Sliding US bond yields undermined the USD and helped limit the downside.
- In-line UK CPI largely offset by softer PPI print and does little to influence.
The GBP/USD pair remained depressed and touched a fresh 27-month low level of 1.2382 during the early European session on Wednesday amid persistent Brexit-related uncertainty. The sentiment deteriorated further after both the UK PM candidates - Boris Johnson and Jeremy Hunt criticized the Irish backstop and pledged to take it away from any future negotiation with the EU. This coupled with the fact that the EU is in no mood to renegotiate the conditions continued fueling fears of a no-deal Brexit and kept exerting some downward pressure.
Meanwhile, a fresh leg of a slide in the US Treasury bond yields failed to assist the US Dollar to build on the overnight goodish up-move - further boosted by upbeat US monthly retail sales data and turned out to be one of the key factors lending some support to the major. The GBP bulls further took cues from mostly in line UK consumer inflation figures, albeit softer UK PPI figures kept a lid on any attempted intraday bounce beyond the 1.2400 round figure mark.
Wednesday's economic docket also features the release of US housing market data - building permits and housing starts, which might influence the USD price dynamics and produce some short-term trading opportunities later during the early North-American session.
From a technical perspective, the pair has now moved within the striking distance of an important support marked by a four-month-old descending trend-channel. Moreover, technical indicators on the daily chart have moved on the verge of breaking into the oversold territory, setting the stage for some near-term short-covering bounce. Any meaningful recovery might now confront some fresh supply near the 1.2460 region, above which the pair is likely to aim towards reclaiming the key 1.2500 psychological mark.
On the flip side, the mentioned support - currently near the 1.2365 region, should protect the immediate downside, below which the pair is likely to accelerate the slide, though might attract some buying near the 1.2300 round figure mark.
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