GBP/USD Forecast: holding steady above 1.3200 handle; US CPI in focus

On the last trading day of the week, the greenback held steady amid fading hope of a Fed rate-hike next week after data released on Thursday showed monthly US retail sales declined in August for the first time in five months. A larger-than-expected decline in retail sales raised concerns about consumer spending, which has been a key driver of the US economic recovery.

Immediately after the release, the EUR/USD pair jumped to weekly high but retraced quickly and maintained its near-term range-bound trading action. Meanwhile, the GBP/USD pair weakened back below 1.3200 handle as BOE's MPC, on expected lines, voted unanimously to keep the rates steady at record low 0.25% and the asset purchase facility at £435 billion but left doors open for a further rate-cut in November. The pair, however, managed to recover from session low, supported by a broadly weaker US Dollar.

On Friday, both the majors traded in a narrow trading range as investors now look forward to the release of US CPI print, which is expected to climb 1.0% y-o-y in August from July's 0.8% while core CPI (excluding food and energy) is expected to remain unchanged at 2.2% y-o-y. Also in focus would be the preliminary release of Reuters/Michigan Consumer Sentiment Index for September. An empty economic calendar from the UK and Euro-zone is unlikely to provide any impetus during European trading session.

Technical outlook

GBP/USD

The pair is now confronting resistance at 100-SMA (4-hourly) resistance near 1.3240-45 region. On a sustained up-move beyond this immediate resistance, the pair seems to make a fresh attempt towards reclaiming 1.3300 handle (nearing 23.6% Fibonacci retracement level of 1.2865-1.3445 up-move) before heading towards testing a horizontal resistance near 1.3335-40 area.

Alternatively, reversal from current resistance area, and a subsequent drop below 38.2% Fibonacci retracement level support near 1.3220 level, is likely to drag the pair back towards 1.3150 confluence support (comprising of 200-SMA (4-hourly) and 50% Fibonacci retracement level), which if broken convincingly is likely to exert additional selling pressure and continue dragging the towards its next major support near 1.3080-60 region (nearing 61.8% Fibonacci retracement level.

EUR/USD

The pair remains confined in a broad trading range, forming a rectangular chart pattern, suggesting consolidation phase before the next leg of directional move in either direction. Meanwhile, the top end of the trading range near 1.1280-85 zone remains immediate strong resistance, which if cleared should assist the pair to move past 1.1300 handle and head towards testing August monthly high resistance near 1.1365 region.

On the flip side, 1.1210-1.1200 confluence region, comprising of 100-day SMA and 200-SMA (4-hourly), might continue to act as immediate strong support on the downside. On a decisive break below this important support would confirm a break down and is likely to accelerate the slide immediately towards the very important 200-day SMA support near 1.1150-45 region.