It seems that the market sentiment has changed, and investors are clearly inclined towards a dollar rally. Even a sharp increase in the number of unemployment benefit claims did not lead to any significant result. Of course, the pound edged up in the moment, but then it quickly returned to the values it had before the labor market data was published. While the number of initial claims increased by 13,000 and continued claims by 32,000, forecasts were for an increase of 2,000 and 6,000, respectively. Moreover, even industrial production, which recently seemed to be growing by 0.1%, turned out to have decreased by 0.2%. The pace of its decline accelerated to 0.7%. In general, the latest economic reports were distinctly negative, but the dollar did not fall.
Today, the dollar has a good chance to pare its recent losses, if not entirely, then at least partially. Retail sales in the UK might be the trigger, with the pace of decline likely to accelerate from -1.0% to -2.4%.
The GBP/USD pair is under selling pressure. The quote has already dropped more than 100 pips from the resistance level of 1.2500.
On the four-hour chart, the RSI technical indicator shows a sharp decline, driven by the pound's excessive overbought condition that happened earlier in the week.
The Alligator moving averages are headed upwards in the 4-hour chart, indicating a residual signal when the pound rallied on Tuesday.
Outlook
If the bearish bias remains intact, the quote may fall to the 1.2350 level. Selling volumes may decrease near the support level, which could slow down the downward cycle. However, if the price settles below the 1.2350 level, this may extend the downward cycle, and the price could move towards 1.2270.
The complex indicator analysis suggests a bearish signal in the short-term and intraday periods.
