• UK PM candidate Johnson’s comments fuel fears of a no-deal Brexit and prompt fresh selling.
  • The USD rebounds on not so dovish comments by Fed officials, adding to the bearish pressure.
  • Wednesday’s BoE inflation report hearing/Carney’s comments/US data eyed for fresh impetus.

The GBP/USD pair faded Tuesday's early bullish spike to one-month tops and dropped over 100-pips intraday, erasing gains recorded in the previous two trading sessions. The post-FOMC US Dollar selling pressure initially extended some support and helped the pair to finally make it through the 1.2760 heavy supply zone. The positive momentum fizzled out rather quickly after the favourite UK PM candidate Boris Johnson reiterated his plans to leave the EU by October 31. Meanwhile, data released by the UK Confederation of British Industry (CBI) showed monthly retail sales fell from -27 to a lower-than-forecast -42 in June - marking the fastest annual slump in 10 years and further dampened sentiment around the Sterling.

Traders largely ignored Tuesday's disappointing US economic data - showing that new home sales plunged -7.8% in May and consumer confidence index unexpectedly fell to 121.5 in June from a downwardly revised reading of 131 recorded in the previous month. Meanwhile, not so dovish comments by St Louis Fed President James Bullard, dismissing a 50bps rate cut, and the Fed Chair Jerome Powell provided a goodish lift to the greenback and exerted some additional downward pressure on the major. The pair finally settled near the lower end of its daily trading range and remained depressed for the second consecutive session on Wednesday.

Looking ahead, the Bank of England’s (BoE) inflation report hearings and the BoE Governor Mark Carney's press conference will now play an important role in influencing the sentiment surrounding the British Pound. Apart from this, the US economic docket - featuring the release of monthly durable goods orders data, might further contribute towards producing some short-term trading opportunities later during the early North-American session.

From a technical perspective, the previous session's break below 100-hour SMA - coinciding with 23.6% Fibo. level of the 1.2506-1.2784 recent up-move, and now a subsequent slide below 38.2% Fibo. level paves the way for further weakness. A follow-through weakness below another confluence support near the 1.2650-45 region - comprising of 200-hour SMA and 50% Fibo. level, will reaffirm the bearish outlook and accelerate the fall further towards the 1.2600 round figure mark. Failure to defend the mentioned handle will indicate the resumption of the prior well-established downward trajectory and turn the pair vulnerable to head back towards challenging the key 1.2500 psychological mark in the near-term.

On the flip side, any attempted up-move beyond the 1.2700 handle might now confront some fresh supply near the overnight confluence support breakpoint, around the 1.2720 region. Any further recovery seems more likely to remain capped near the 1.2760 stiff resistance zone, which if cleared decisively would set the stage for a strong follow-through up-move towards reclaiming the 1.2800 handle en-route the next major supply zone near the 1.2840-45 region. 

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