GBP/USD analysis: Upbeat UK retail sales helped gain follow-through traction, Brexit uncertainty capping gains

The GBP/USD pair built on the overnight bounce from sub-1.2400 level, or 27-month lows and continued gaining positive traction through the early European session on Thursday. After hitting a one-week high in the aftermath of Tuesday's upbeat US retail sales data, the US Dollar changed course and was seen as one of the key factors fueling the ongoing recovery for the second straight session. 

The US Treasury bond yields were facing downward pressure on the back of an impending rate cut by the Fed and eventually undermined the greenback demand. The buck was further pressurized by the International Monetary Fund (IMF) statement on Wednesday, saying that the US currency was overvalued by 6% to 12% based on near-term economic fundamentals. 

On the other hand, the British Pound got a minor lift after the European Union (EU) chief Brexit negotiator Michel Barnier's comments, showing readiness to work on alternative arrangements for the Irish border. This was followed by the upbeat release of UK monthly retail sales figures and remained supportive of the move back closer to the key 1.2500 psychological mark. 

In fact, the headline UK retail sales reversed the previous month's decline of 0.6% and posted a strong 1.0% growth in June as compared to consensus estimates pointing to a further drop of 0.3%. Adding to this, the core retail sales - excluding fuel, rose by 0.9% during the reported month as against a decline of 0.2% expected and -0.4% previous.

Meanwhile, fears of a no-deal Brexit were partly mitigated by a move by British MPs to bring forward a clause seeking to ensure parliament is not suspended on key dates in October. A scheduled debate in the House of Commons on Thursday may provide more clarity and influence the broader market sentiment surrounding the British Pound.

Later during the early North-American session, the second-tier US economic releases - Philly Fed manufacturing index and the usual initial weekly jobless claims, will further be looked upon for some short-term trading opportunities ahead of a scheduled speech by the New York Fed President John Williams.

From a technical perspective, further recovery is likely to confront immediate resistance near the 1.2500 handle, which is closely followed by the 1.2520-25 region ahead of weekly swing highs - around the 1.2575-80 supply zone. Follow-through strength might negate the near-term bearish bias and lift the pair further beyond the 1.2600 mark towards testing the next major hurdle near the 1.2650-60 region.

On the flip side, immediate support is pegged near the 1.2455-50 region, which if broken might turn the pair vulnerable to accelerate the slide back towards challenging the 1.2400 round figure mark. Any subsequent slide might continue to attract some dip buying near a support marked by the lower end of a four-month-old descending trend-channel and help limit deeper losses.