GBP/USD
Cable fell on Wednesday morning on weaker than expected UK inflation data for November, losing around 0.4% after the data was released.
Stronger-than-expected drop in consumer prices supports the rate cut scenario, making the Pound less attractive, although recent comments from BOE Deputy Governor about keeping policy restrictive for some time may partially offset the impact of the inflation report.
Fresh weakness is on track to fully reverse Tuesday’s advance (the pair gained 0.65%) and challenge key supports at 1.2636/31 (converging 10/20 DMA’s).
Short-term bias is expected to remain bullish as long as these supports hold (daily studies show MA’s in bullish configuration and 14-d Momentum in positive territory) and keep in play scenario for renewed probe through cracked Fibo barrier at 1.2919 (61.8% of 1.3141/1.2037) and possible acceleration towards pivotal 1.2800 zone.
Conversely, firm break of 10/20DMA would weaken short-term structure and risk deeper pullback towards key supports at 1.2510/00 zone (200DMA / Dec 8/13 higher base).
