GBP/USD Forecast: 1.3000 mark holds the key for bulls, focus remains on Brexit talks

• GBP/USD witnessed a dramatic intraday turnaround from YTD tops set on Wednesday.
• The FOMC minutes-led strong USD rebound prompted some aggressive long-unwinding.
• Investors now await updates on the latest round of Brexit negotiations for a fresh impetus.

The GBP/USD pair refreshed YTD tops on Wednesday following the release of hotter-than-expected UK consumer inflation figures. In fact, the headline CPI accelerated to 1.0% YoY in July from 0.6% previous and expected, offering the BoE more time to continue with its current wait-and-watch approach. The uptick, however, lacked any follow-through, instead, the pair witnessed some aggressive selling amid resurgent US dollar demand. After falling to the lowest level since April 2018, the greenback staged a solid rebound and exerted pressure on the major.

The buck got a strong boost following the release of minutes from the last FOMC meeting held on July 28-29. The fact that minutes offered few clues on whether the Fed will adopt a more dovish policy framework in the months ahead disappointed the USD bears. Adding to this, a number of Fed members judged that yield caps and targets were not warranted as it would likely provide only modest benefits in the current environment. This, in turn, triggered a selloff in the US Treasuries, pushing the bond yields higher across the board and prompting some USD short-covering move.

As investors eagerly awaited updates on the latest round of Brexit negotiations, a broad-based USD strength led to some long-unwinding trade around the major. The sharp intraday fall of over 175 pips dragged the pair below the 1.3100 mark, back closer to the lower end of its weekly range. The pair now seems to have entered a bearish consolidation phase and was seen oscillating in a narrow band through the Asian session on Thursday. In the absence of any major market-moving economic releases from the UK, Brexit-related developments will influence the sentiment surrounding the sterling.

Meanwhile, the US economic docket highlights the release of Philly Fed Manufacturing Index and Initial Weekly Jobless Claims. The data, along with the broader market risk sentiment will further contribute to produce some meaningful trading opportunities later during the early North American session.

Short-term technical outlook

From a technical perspective, weakness below the 1.3070 area could drag the pair further towards the 1.3030-25 horizontal support. This is closely followed by the key 1.3000 psychological mark. A convincing breakthrough the mentioned support levels, leading to a subsequent fall below monthly lows, around the 1.2980 region, will be seen as a fresh trigger for bearish traders and pave the way for an extension of the corrective slide. The pair might then accelerate the decline towards the 1.2900 round-figure mark.

On the flip side, the 1.3100 mark now seems to act as an immediate strong resistance, above which the pair could appreciate back towards the 1.3140-50 supply zone. Some follow-through buying will set the stage for the resumption of the recent strong upward trajectory and assist the pair to aim back to reclaim the 1.3200 mark. The momentum could further get extended towards December 31 swing highs, around the 1.3285 region, en-route the 1.3300 mark.