GBP/USD recovers portion of daily losses, remains below 1.29

After falling to its lowest level since the beginning of the week at 1.2850 during the European trading hours, the GBP/USD pair gained traction in the NA session and retraced half of its daily losses. As of writing, the pair was trading at 1.2890, down 0.26%, or 35 pips, on the day.

A broad-based selling pressure on the greenback following the disappointing inflation data from the U.S. helped the pair find support and reverse course. According to the data released by the Bureau of Economic Analysis on Thursday, the PCE price index, the Fed's favorite inflation gauge, fell to 1.4% on a yearly basis in July, the lowest reading since late 2015. On the other hand, personal spending increased by 0.3% on a monthly basis in July but the failed to meet the market estimate of 0.4%. The US Dollar Index, which jumped to its highest level since last Friday at 93.30 earlier in the day, plummeted back into the negative territory. At the moment, the index was at 92.80, losing 0.04% on the day.

Despite the greenback weakness, the pair is having a tough time extending its gains. The fact that the EUR/GBP pair is preserving its daily gains above the 0.92 handle shows that the demand for the GBP remains dismal.

With today's data out of the way, investors are now anxiously waiting for the critical nonfarm payroll report. Valeria Bednarik, Chief Analyst at FXStreet, writes, "July's NFP and August ADP suggest that the employment sector has accelerated its recovery from previous strong levels. Again, the employment sector has been on the healthy path for long, and when thinking of the two main Fed's concerns, it has long not been one. Inflation, on the other hand, is a stone around Fed's neck this year, which means that in the case of a strong report, dollar's advance won't guarantee continuation. However, if some critical levels are broken, dollar's recovery could extend in time."

Technical outlook

The pair could encounter the initial hurdle at 1.2910 (100-DMA) ahead of 1.2980 (50-DMA) and 1.3030 (Aug. 11 high). On the downside, supports are located at 1.2850 (daily low), 1.2795/1.2800 (Aug. 25 low/psychological level) and 1.2705 (Jun. 26 low). The RSI on the daily graph remains below the 50 mark despite this latest recovery, suggesting that the pair is likely to stay under pressure in the near-term.

• GBP/USD stays neutral/bearish near term – Scotiabank

Today's data from the U.S.

• US: Personal income increased $65.6 billion (0.4%) in July
• US: Weekly initial claims was 236,000, an increase of 1,000 from previous week
• US-based employers announced plans to cut payrolls by 33,825 in August
• US: Pending home sales lessen 0.8% in July
• US: August Chicago Business Barometer stayed unchanged at 58.9