The GBP/USD pair had a rather volatile day on Wednesday and was influenced by a combination of diverging forces. The pair started off on a stronger note and climbed to over eight-week high level of 1.3215 on the back of hotter-than-expected UK consumer inflation figures. The sentiment quickly turned after a report suggested that the UK PM Theresa May was going to reject the EU's new proposal on the Irish border. The pair came under some intense selling pressure and tumbled to sub-1.3100 level, reversing around 120-pips from session tops.
The pair, however, managed to recover early lost ground after the European Council President Donald Tusk said that May’s Chequers proposals indicated a positive evolution in the UK’s approach, though a Brexit deal was still "far away". The pair finally ended nearly unchanged for the day and held steady through the Asian session on Thursday as market participants now look forward to the UK monthly retail sales data for some fresh impetus.
Apart from the UK macro data, second-tier US economic releases might also be looked upon for some short-term trading opportunities. The key focus, however, would be on the informal meeting between the UK PM Theresa May and EU leaders in Salzburg.
From a technical perspective, yesterday's good two-way price action constituted towards the formation of a Doji candlestick chart pattern on the daily chart, indicating indecision over the pair's next leg of directional move. Meanwhile, the pair's inability to sustain above 100-day SMA further suggests that the recent recovery move might have already run out of steam.
A follow-through weakness below the 1.3100 handle will reinforce the expectations and turn the pair vulnerable to head towards testing the 1.3060-50 intermediate support before eventually sliding back towards the key 1.30 psychological mark.
However, technical indicators on the mentioned chart are still holding in bullish territory. Hence, a sustained move beyond the 1.3200 handle would invalidate the negative outlook and pave the way for an extension of the pair's near-term upward trajectory further towards reclaiming the 1.3300 round figure mark.
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