• DXY tumbles to 4-month lows.
• Shorts run to cover their positions.
• Focus shifts to the key US macro data.
The USD selling pressure remained unabated, with the GBP/USD pair now building on its strong bullish momentum further beyond the 1.3600 handle.
Thursday's downbeat US economic reports, especially an unexpected drop in producer prices, continued weighing on the US Dollar and assisted the pair to build on previous session's sharp recovery move from 1-1/2 week lows.
The up-move got a strong boost during the early European session amid a fresh wave of intense USD selling pressure following a news that German party leaders have reached a breakthrough in coalition talks.
The greenback weakness from the last week of December continued through the early new year, with the DXY plunging to its lowest level since September and driving the pair higher on the last trading day of the week.
The latest leg of upsurge over the past hour or so looks more of a follow-through short-covering move on a sustained trade above the 1.3600 handle.
Next in focus would be the US economic docket, featuring the release of consumer inflation figures and monthly retail sales, which would be looked upon for some immediate USD respite and some short-term trading opportunities.
Technical levels to watch
September 2017 highs, around the 1.3655-60 region now seems to act as immediate strong resistance, above which the pair seems all set to aim towards reclaiming the 1.3700 handle and continue with its near-term upward trajectory.
On the flip side, the 1.3615-10 region now becomes an immediate support to defend and is followed by 1.3585-80 area. Weakness below the mentioned levels might prompt some additional profit taking slide back towards 1.3535-30 support.
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