GBP/USD bullish above 1.29, turns positive on day ahead of FOMC

The GBP/USD pair, which fell to a session low at 1.2895 in the European session, recovered above the 1.29 handle in the second half of the day and took back its daily losses. At the moment, the pair is trading at 1.2929, up 0.02% on the day.

Earlier in the day, the cable came under fire after the report by Markit Economics revealed that the service sector activity in the U.K. contracted for the second straight month. Further details of the report also showed that the new business growth eased to a nine-month low and the overall optimism plummeted to its second worst level since late 2011. More importantly, today's report showed that the BoE MPC members in their latest statements had been over-optimistic about the economic outlook, hurting the prospects of an interest rate hike.

• GBP: Second guessing the BoE – Rabobank

Nevertheless, it seems like investors refrained from taking large short positions before the FOMC releases its meeting minutes from the June meeting. A hawkish surprise could trigger another sell-off in the pair. On the other hand, if markets don't find any clues regarding the timing of the reinvestment strategy and the timing of the next rate hike, the technical correction that we've been seeing in the US Dollar Index could come to an end, helping the pair aim for 1.30 mark again.

• US: Durable goods and FOMC minutes in focus – BBH

Technical outlook

At the moment, the pair is moving sideways around the Fib. 23.6% retracement of its latest (Jun. 21/Jun 30) rise at 1.2925. With a daily close below that level, the pair's fall could continue towards 12860 (Fib. 38.2%/50-DMA) and 1.2800 (psychological level/ Fib. 50%). On the upside, 1.3000 (psychological level) aligns as the initial hurdle ahead of 1.3030 (Jun. 30 High) and 1.3120 (Sept. 22, 2016, high).