The pair caught a strong tailwind to push higher yesterday from 1.2100 to a high of 1.2275 but buyers could not hold gains through to the daily close - seen at 1.2210. That is keeping the key trendline resistance (white line) from the late May to early August highs at around 1.2225 still in play and is one to watch in the sessions ahead as the dollar stays sluggish.
A break above that will put the 1 August high at 1.2293 into focus before we look towards 1.2400 again.
For now, there are multiple suggestions across the charts that the dollar still has some scope to decline after yesterday's reaction to the US CPI data. That said, broader markets are not getting too carried away with Fed funds futures pricing not really closing the door towards a 75 bps rate hike. Odds of that dropped from ~68% to ~30% after the key risk event yesterday but are now resting around ~43% again.
It seems like we may need more data and confirmation from Fed speakers to really vindicate any further material repricing. And in that sense, it will also be a factor to watch for the dollar against the other major currencies.
The pound itself won't get much help from domestic fundamentals but with the market extremely focused on dollar sentiment right now, it's all about reading into that and the technicals rather than sterling sentiment currently. So, keep an eye on the technical resistance levels pointed out above in gauging the next potential leg of dollar weakness.