GBP/USD Outlook: Path of least resistance is higher, move beyond 1.2400 awaited

• GBP/USD comes under some selling pressure on Friday, though the downside seems limited.
• The dismal UK Retail Sales weigh on the GBP and exert pressure amid a modest USD uptick.
• A positive risk tone keeps a lid on the safe-haven greenback and lends support to the major.
• The prospects for more BoE rate hikes support prospects for the emergence of dip-buying.

The GBP/USD pair once again faced rejection near the 1.2400 round-figure mark and meets with a fresh supply on the last day of the week. Spot prices reverse the previous day's positive move and snap a three-day winning streak amid a modest US Dollar strength, bolstered by a further recovery in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond move further away from its lowest level since mid-September touched on Thursday amid uncertainty over the Fed's rate-hike path going forward.

It is worth mentioning that investors have been expecting the US central bank to soften its stance amid signs of easing inflationary pressures. That said, the upbeat US macro data released on Thursday, along with hawkish rhetoric from several Fed officials, force market players to trim their bets for a smaller 25 bps lift-off in February. This, in turn, is seen pushing the US bond yields higher and underpinning the greenback. The British Pound, on the other hand, is weighed down by the disappointing release of the UK macro data.

The UK Office for National Statistics reported that the total value of inflation-adjusted sales at the retail level fell 1% in December, missing expectations for a 0.5% rise by a big margin. This comes on the back of the dismal GfK Consumer Confidence Index, which fell for the first time in three months, to -45 in January - the third-lowest reading since records started in 1974. That said, a generally positive tone around the equity markets keeps a lid on any meaningful upside for the safe-haven buck and should lend some support to the GBP/USD pair.

Furthermore, the overnight optimistic remarks by the Bank of England Governor Andrew Bailey, saying that the recession will be a shallow one by historic standards, should limit losses for the GBP/USD pair. Adding to this, expectations that the BoE will raise interest rates by 50 bps on February 2 support prospects for the emergence of some buying at lower levels. Traders now look to the release of the US Existing Home Sales data. This, along with Fedspeaks, might influence the USD and produce short-term trading opportunities around the major.

Technical Outlook

From a technical perspective, any subsequent slide is more likely to find decent support ahead of the 1.2300 round-figure mark. The next relevant support is pegged near the 1.2250 horizontal resistance breakpoint, which should act as a strong base for the GBP/USD pair. That said, a convincing break below the latter might prompt some technical selling and drag spot prices further towards the 1.2200 mark.

On the flip side, the 1.2400 mark now seems to have emerged as an immediate strong barrier ahead of the one-month high, around the 1.2445 area touched on Wednesday. Some follow-through buying should allow the GBP/USD pair to reclaim the 1.2500 psychological mark for the first time since June. The upward trajectory could get extended further towards the 1.2555-1.2560 hurdle en route to the 1.2600 mark.