GBP/USD forecast: Attempted recovery from 27-month low lacks conviction ahead of UK retail sales

The GBP/USD pair witnessed an intraday turnaround on Tuesday and bounced around 70-pips after hitting fresh 27-month, though persistent fears of a no-deal Brexit capped any meaningful up-move. The pair initially fell to the 1.2382 level - the lowest since April 2017, in reaction to softer UK consumer inflation figures, showing that the headline CPI remained flat in June and the yearly rate held steady at 2.0%. Adding to this, the UK Producer Price Index posted a modest decline of 0.1% in June and rose by 1.6% year-on-year, both missing consensus estimates, though some renewed US Dollar selling helped limit deeper losses. 

With investors looking past Tuesday's upbeat US monthly retail sales data, a sharp intraday slide in the US Treasury bond yields exerted some fresh downward pressure on the greenback and turned out to be one of the key factors that helped ease bearish pressure surrounding the major. The USD lost some additional ground in the wake of disappointing US housing market data - building permits and housing starts, which raised chances of aggressive easing by the Fed later this month and provided an additional boost to the pair's attempted recovery move. 

The USD bulls held on the defensive and remained supportive of the pair's modest uptick during the Asian session on Thursday. Moving ahead, the UK monthly retail sales data, expected to have declined by 0.3% month-over-month and decelerated to 2.3% annual rate, will now be looked upon for a fresh impetus. From the US, the releases of Philly Fed Manufacturing Index and the usual initial weekly jobless claims data will influence the USD price dynamics and further collaborate towards producing some short-term trading opportunities ahead of a scheduled speech by the New York Fed President John Williams.

From a technical perspective, the pair managed to attract some buying near the lower end of a four-month-old descending trend-channel, which should now act as a key pivotal point for the pair’s next leg of a directional move. In the meantime, the 1.2400 round figure mark now seems to act as an immediate support and any subsequent slide might continue to attract some dip buying near the mentioned support, currently near the 1.2370-60 region.

On the flip side, immediate resistance now awaits near the key 1.2500 psychological mark, above which the momentum could further get extended back towards weekly tops, around the 1.2575-80 supply zone, with some intermediate resistance near the 1.2520-25 region.