GBP/USD is finding a base at the 1.2400 handle for now
But the chart certainly doesn't look pretty. The close yesterday sees price fall below the 76.4 retracement level @ 1.2439 but the only saving grace for buyers is that they managed to halt the decline from breaking below the 1.2400 handle at the close.
That is still keeping them "in the game" for now but it doesn't change the fact that this could still potentially be a slippery slope to the downside once the 1.2400 level gives way.
Further downside support is only seen around 1.2351-77 next from the March/April 2017 swing lows but beyond that we could be staring at a quick drop towards 1.2110 and potentially 1.2000 next. The only plausible factor preventing that is stretched positioning but at the same time, it's never wise to pick a bottom when you see something like this.
For buyers, today is all about surviving a test of the 1.2400 handle and try to get back above the swing region around 1.2440-50. That will provide more confidence in the coming sessions but even then there is still plenty of work to do in order to reverse current market sentiment against the pound.
Only if price starts to work its way back towards the key hourly moving averages (~1.2510) then I would dare say that there is a potential for buyers to chase a further move higher. Otherwise, this can be seen as merely a bit of a pause before a continuation back to the downside over the next few sessions.
Looking ahead today, we'll have the release of UK CPI data for June but similar to yesterday, inflationary pressures aren't the main focus for the pound at the moment. Sure, it's a good thing that inflation is holding up but when you have economic growth contracting and increasing odds of a no-deal Brexit outcome, you have to first put out the fire before attending to other matters when the house is burning down.
