GBP/USD rejected below 100-DMA, now eying 1.2600 for immediate support

After Monday's volatile session, the greenback managed to post a mild recovery but remained in a narrow range as investors cautiously await for influential central bank monetary policy meetings, ECB on Thursday and FOMC on December 13-14. On Tuesday, the GBP/USD pair extended its near-term recovery trend and jumped to a fresh two-month high level of 1.2775 but failed to extend the up-move and faced rejection just below 100-day SMA resistance. The pair subsequently turned lower, snapping 5-days of winning streak, and dropped to mid-1.2600s. Meanwhile, the EUR/USD pair also struggled to build on Monday's strong up-move and reversed sharply to test 1.0700 handle on comments from Italian Interior Minister Angelino Alfano that Italy could have an early election, as early as in February.

Both the majors were seen oscillating in a narrow trading band during Asian session amid relatively quieter economic docket on Wednesday. UK manufacturing and industrial production data will be the key highlight during European session. Elsewhere, Germany will also release industrial production data, while from the US JOLTS Job Openings might provide some impetus for short-term traders during early NA session.

Technical outlook

GBP/USD

Having faced rejection just below 100-day SMA resistance, the pair now seems to extend its reversal move further towards 1.2600 round figure mark support. Failure to defend 1.2600 handle is likely to drag the pair further towards its next support ear 1.2540-35 region representing 38.2% Fibonacci retracement level of 1.3439-1.1980 slide. A follow through selling pressure now seems to open room for further near-term depreciating move for the pair.

On the upside, any up-move might now confront strong resistance at 50% Fibonacci retracement level near 1.2700 region. A convincing move back above 1.2700 resistance now seems to provide the required momentum to lift the pair towards 100-day SMA resistance near 1.2790 region before the pair darts towards a short-term ascending trend-channel resistance near 1.2860-70 region, also coinciding with 61.8% Fibonacci retracement level.

EUR/USD

Despite of Tuesday’s slide, the pair has managed to hold 23.6% Fibonacci retracement level of 1.1300-1.0506 recent down-leg and hence, a renewed buying interest above 1.0750 immediate resistance should now assist the pair towards 1.0800 confluence resistance, comprising of 200-SMA (4-hourly) and 38.2% Fibonacci retracement level. Sustained move above 1.0800 handle could further get extended towards 50% Fibonacci retracement level resistance near 1.0900 round figure mark with 1.0855-60 horizontal zone acting as intermediate resistance.

On the flip side, decisive break below 23.6% Fibonacci retracement level support near 1.0700-1.0690 region now seems to drag the pair immediately towards 1.0625 horizontal support. Weakness below 1.0625 support would negate possibilities of any further recovery and turn the pair vulnerable to head back towards its next major support near 1.0535-30 region, closer to recent multi-month lows.