“¢ UK CPI-led intense selling now seems to have abated.
“¢ Oversold conditions prompted some short-covering.
“¢ Traders also seemed to reposition ahead of the FOMC minutes.
The GBP/USD pair trimmed some of its early steep losses and has managed to recover over 50-pips from fresh YTD lows.
The pair stalled its ongoing bearish slide, further aggravated by decelerating UK inflation, and found some decent support near the 1.3300 handle. The US Dollar bulls seemed taking a breather near the 94.00 handle and prompted some short-covering at lower levels.
This coupled with some repositioning trade, wherein traders seem to lighten their bearish bets, ahead of today’s key event risk – the release of latest FOMC meeting minutes, could also be one of the factors behind the pair’s sharp intraday recovery back above mid-1.3300s.
It, however, remains to be seen if the recovery is backed by any genuine buying or is solely led by short-covering amid fading prospects of any near-term BoE rate hike move and reemerging Brexit concerns. Hence, it would be prudent to wait for a meaningful/sustained bounce before confirming that the pair might have bottomed out in the near-term.
Technical levels to watch
Any subsequent recovery beyond 1.3375-80 area might now confront stiff resistance near the 1.3400 handle, above the pair could recover further towards the 1.3430-35 supply zone. On the flip side, the 1.3315-10 region now seems to protect the immediate downside, which if broken might turn the pair vulnerable to extend its bearish trajectory towards testing the 1.3200 handle in the near-term.
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