The pound/dollar pair extended a disappointing U.K. monthly retail sales-led decline and traded with bearish bias for the third straight session, albeit while managing to hold above the 1.2200 handle. On Thursday, the pair dropped to as low as 1.2210 and was weighed down by the latest European Central Bank monetary policy statement.
ECB President Mario Draghi, at a subsequent press conference following the announcement, said the central bank's governing council neither discussed extending the assets buying program beyond original deadline March 2017 nor tapering the size of bond purchases. The euro/dollar pair swung to a four-day high level of 1.1039 after the opening statement but reversed quickly and has now plunged to the 1.0900 handle, the lowest level since March.
Meanwhile, comments from Federal Reserve New York President William Dudley that the Fed will be able to raise interest rates and that he does expect an interest rate hike later this year, added to ECB-led strength for the U.S. dollar and continued driving both the pound/dollar and the euro/dollar majors lower on the final trading day of the week.
A relatively thin U.K. economic docket, featuring the only release of Public Sector Net Borrowing, is unlikely to provide any fresh impetus, with the market deriving movement from the broader sentiment surrounding the greenback and the shared currency, euro.
Technical outlook
From current levels, the pair seems to aim toward testing a short-term ascending trend-channel support near 1.2200 handle, which if broken decisively would confirm a breakdown and trigger a fresh leg of depreciating move for the pair initially toward 1.2150-1.2100 intermediate supports and eventually toward flash-crash swing lows support near 1.2000 psychological mark.
Conversely, any recovery attempt might now confront immediate resistance near 1.2270 region, which if cleared seems to assist the pair beyond the 1.2300 handle toward testing the ascending trend-channel resistance near 1.2350-55 region with 1.2335 weekly high acting as intermediate resistance.
Although the technical indicator seems to be entering near-term oversold conditions, the pair seems more likely to extend its downward trajectory initially toward 1.0860 support before eventually dropping to test an important horizontal support near the 1.0820-15 region (lows formed in February and March). A follow-through selling pressure should now turn the pair vulnerable to extend the ongoing depreciating move further in the near term.
On the flip side, any recovery attempts might now confront immediate resistance near 1.0930 level above which the recovery momentum could get extended but is likely to face a strong hurdle at an important horizontal support break-point, now turned strong resistance, near 1.0950-60 region. Even if the pair manages to clear this strong hurdle, any further up move should now be capped at 1.1000 psychological mark.
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