GBP/USD drops back towards 1.2140, risk-off returns?

The supply capped minor-recovery in GBP/USD once again near 1.2180 region, sending the rate back towards the familiar region near the mid-point of 1.21 handle amid resurfacing risk-off trades, following the release of mixed China inflation figures.

The Chinese CPI figures disappointed across the time zone and added to yesterday’s trade deficit shock, spooking market sentiment once again.

Meanwhile, a better bid US dollar against its main competitors, in wake of upbeat ADP jobs report, also adds to the bearish pressure seen behind cable.

On Wednesday, the pound breathed a sigh of relief and rebound briefly to 1.2185 levels following the release of the UK budget statement, before losing all its recovery gains on the release of auspicious US private sector jobs data.

Looking ahead, the UK docket remains data-empty today and hence, focus remains on the ECB policy decision for any ‘rub-off’ effect on the GBP.

GBP/USD Levels to consider            

At 1.2163, the resistances are lined up at 1.2200/14 (round figure/ 5-DMA) and 1.2250/53 (psychological levels/ Mar 7 high) and above that at 1.2290/04 (classic R3/ Mar 6 high). On the flip side, the resistances are aligned at 1.2134/27 (classic S2/ Fib S3) and 1.2100 (psychological levels) and below that at 1.2050 (Flash crash territory).