GBP/USD Forecast: After the one-two punch, oversold conditions may not be enough for a recovery

• The GBP/USD is trading around $1.3500, still licking its wounds from the one-two punch on Tuesday. 
• A relatively light calendar leaves room for Brexit headlines and the US yields to have their say.
• The pair is in oversold conditions but that does not mean any more falls.

The GBP/USD is hugging the 1.3500 level on Wednesday after a dramatic Tuesday.

UK wages came out as expected for March, with a deceleration to 2.6% on the total number and an acceleration to 2.9% in the measure of earnings excluding bonuses. However, the Claimant Count Change, or jobless claims, stole the show. These showed a jump of 31,200 claims in April, quadruple the early expectations. To add an insult to injury, the figure for March was revised to the upside. If this continues, the very low unemployment rate of 4.2% recorded in March will rise before long.

After Sterling suffered its own trouble, the US Dollar side of the equation pushed the pair lower as well. A surge in US bond yields drove the Dollar higher across the board. US Retail Sales rose as expected in April but upwards revisions served as an excuse to sell bonds and buy the US Dollar. The pair reached a new 2018 low of $1.3451 before bouncing back.

What can we expect today? In the UK, there are no planned economic releases but Brexit headlines could move markets. UK Prime Minister Theresa May split her cabinet to sub-groups in order to discuss various issues. Creative solutions to the Customs Union issue are on the table and are causing internal clashes. In any case, the UK government is currently negotiating within itself and we are yet to hear from the EU about ideas such as the Maximum Facilitation (or Max Fac) that is a complex system of rebates that the EU will likely reject. The EU's Chief Negotiator Michel Barnier sounded somewhat pessimistic about negotiations early in the week. Scotland's First Minister Sturgeon also warned of "catastrophic results".

In the US, Building Permits and Housing Starts are due at 12:30. These second-tier figures need to go in the same direction in order to have a substantial impact on the US Dollar. At 13:15, US Industrial Output is published.

Unless these figures provide shocking surprises, the Dollar driver will likely remain the level of the 10-Year Treasury yield. The global benchmark is off the highs near 3.10% and sits around 3.06% at the time of writing. Another advance could push the pair lower.

GBP/USD Technical Analysis - Oversold but it may not be enough

Cable is in oversold territory according to the RSI, which is below 30. Does this dip imply an imminent bounce? Probably not. Momentum remains to the downside and the pair recently slipped below the 200-day Simple Moving Average, a bearish sign. 

$1.3500 remains a battle line. Below, the fresh 2018 low of $1.3451 is the next level of support. It is followed by 1.3350 that was seen in mid-November and the round number of $1.3300 seen earlier. 

On the topside, $13560 is where the 200-day SMA meets the price. Further above, $1.3620 capped the pair in recent days. It is followed by the round number of $1.3700.

More: GBP/USD Forecast: bears struggle to push it through 1.3450 support