GBP/USD forecast: The upside seems capped near 1.2900 handle, US retail sales in focus

• A modest USD pullback helped gain some traction on Thursday.
• UK political uncertainty kept a lid on any subsequent move up.

The GBP/USD pair finally broke out of its three-day-old consolidative trading range on Thursday and jumped back closer to weekly tops, albeit the uptick once again faltered ahead of the 1.2900 handle. As investors looked past softer UK monthly retail sales data, which fueled concerns about slowing economic growth, a modest US Dollar pullback was seen as one of the key factors that helped the pair to regain some late traction on Thursday.

UK politics remains in focus

The US Dollar softened in the wake of a sharp intraday pullback in the US Treasury bond yields and remained on the defensive after the initial weekly jobless claims unexpectedly rose to a five-month high. Meanwhile, the Fed Chair Jerome Powell's second day of congressional testimony offered fresh clues on the US central bank's monetary policy outlook and did little to provide any meaningful impetus.
 
Despite the supporting factor, the pair lacked any strong bullish conviction as investors still seemed to refrain from placing any aggressive bets amid uncertainty over the outcome of the UK snap election in December. It is worth reporting that the incoming polls have been showing a majority for the ruling Conservative party and the odds increased further after the Brexit party leader Nigel Farage said on Thursday that they will fight the Labour party in all of its seats, though did little to impress bullish traders.
 
Meanwhile, the overnight optimistic trade-related comments by White House economic adviser Larry Kudlow, saying that there has been “very good progress,” and that a US-China trade agreement was close, boosted the global risk sentiment. The same was evident from a goodish pickup in the US bond yields during the Asian session on Friday, which extended some support to the USD and kept a lid on any subsequent move up for the major.
 
Moving ahead, Friday's UK economic docket lacks any major market-moving releases and hence, the incoming UK political/Brexit headlines might continue to act as an exclusive driver of the sentiment surrounding the Sterling. Later during the early North-American session, the release of the US monthly retail sales figures will influence the USD price dynamics and further contributed towards producing some meaningful opportunities on the last trading day of the week.

Short-term technical outlook

From a technical perspective, bulls might still wait for a sustained move beyond the 1.2900 handle before positioning for a further near-term appreciating move towards 1.2965-70 intermediate resistance. The momentum could further get extended and assist the pair to aim back towards reclaiming the key 1.30 psychological mark.
 
On the flip side, 100-hour SMA – around mid-1.2800s – now becomes immediate support to defend and is closely followed by the 1.2820-15 region, which if broken might turn the pair vulnerable to break below the 1.2800 handle. Any subsequent weakness is more likely to remain limited and attract some dip-buying near last week’s swing lows, around the 1.2770-65 region. Failure to defend the mentioned support might drag the pair further towards testing the 1.2715-10 region.