The British Pound came under some intense selling pressure on Tuesday on the back of a report, suggesting that Labour party members were to support the amendment offered by rebel Tory MPs to keep Britain in the customs union if no trade deal is reached by January 2019.
The GBP/USD pair retreated sharply from an intraday high level of 1.3269, touched in the aftermath of mostly in-line UK employment details, and was further weighed down by resurgent US Dollar demand, which got an additional boost from the Fed Chair Jerome Powell's upbeat comment on the US economy.
The selling pressure, however, abated after the UK PM Theresa May narrowly defended the main amendment to the trade bill by 307 to 301 votes. The recovered around 50-pips from lows but lacked any follow-through and witnessed some fresh selling during the Asian session on Wednesday.
Currently holding weaker below the 1.3100 handle, the release of latest UK inflation figures will now be looked upon for some fresh impetus during the European trading session. The fact that an August BoE rate hike is still very much on the cards, a hotter than expected reading should provide some immediate respite for the Sterling bulls.
From a technical perspective, the pair has repeatedly failed to clear an important hurdle marked by the top end of a short-term descending trend-channel formation on the daily chart. Hence, a follow-through weakness below mid-1.3000s (YTD lows) might now turn the pair vulnerable to aim towards testing the trend-channel support, near the 1.2950-40 region with the key 1.30 psychological mark acting as an intermediate support.
On the flip side, any recovery attempt back above 1.3130 horizontal level might confront resistance near the 1.3165-70 area and is followed by the 1.3200 handle. Momentum beyond the 1.3200 handle might continue to be capped at the trend-channel resistance, currently near the 1.3260-65 region.
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