- The USD bulls gained some respite from Thursday’s hotter-than-expected US core CPI.
- The pair’s recovery move was further capped by persistent fears about a no-deal Brexit.
- Traders now eye speeches by BoE MPC and FOMC member for some short-term impetus.
The US Dollar selling bias - led by the Fed Chair Jerome Powell's dovish sounding statement for the semi-annual Congressional testimony, remained unabated through the early part of Thursday's trading session and assisted the GBP/USD pair to extend its bounce from six-week lows. The pair climbed to weekly tops, around the 1.2570 region, but then started losing steam in reaction to hotter-than-expected US core CPI print.
In fact, the so-called core CPI - excluding food and energy prices, jumped 0.3% in June and marked the largest increase since January 2018, while the yearly rate also edged higher to 2.1% as against consensus estimates pointing to a stable reading of 2.0%. On the other hand, the headline CPI decelerated to 1.6% yearly rate in June as compared to 1.8% recorded in the previous month but was in line with market expectations.
In a delayed reaction to the latest US consumer inflation figures, a goodish pickup in the US Treasury bond yields helped the greenback to recover the early lost ground and turned out to be one of the key factors that kept a lid on any strong follow-through up-move for the major, rather exerted some intraday downward pressure. The pair, however, managed to regain some positive traction during the Asian session on Friday, though persistent fears of a no-deal Brexit and the UK political uncertainty might continue to cap the upside.
Currently hovering around mid-1.2500s, market participants now look forward to the BoE MPC Member Gertjan Vlieghe's scheduled speech for some impetus. Later during the early North-American session, the US PPI print for the month of June and comments by Chicago Fed President Charles Evans might further collaborate towards producing some short-term opportunities on the last trading day of the week.
Looking at the technical picture, the overnight upswing stalled near 38.2% Fibo. level of the 1.2784-1.2440 recent downfall, albeit the pullback remained support near the key 1.2500 psychological mark. Hence, it would be prudent to wait for a convincing break through the mentioned range before traders start placing any fresh directional bets. Momentum beyond the 1.2570 region (38.2% Fibo. level) is likely to confront a stiff resistance near the 1.2600 horizontal zone, above which a fresh bout of short-covering has the potential to continue lifting the pair further towards 61.8% Fibo. level - around the 1.2650 region en-route the 1.2700 round figure mark.
Alternatively, a sustained weakness below the 1.2500 handle, leading to a subsequent break through the 1.2480 horizontal area might turn the pair vulnerable to accelerate the slide towards the recent swing lows support near the 1.2440 region. A follow-through selling will pave the way for a move back towards challenging yearly lows, around the 1.2400-1.2395 area - coinciding with a four-month-old descending trend-channel and should act as a key trigger for any further near-term depreciating move.
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