Anna 
The British Pound (GBP) experienced a retracement from its newly attained three-month high in European trading on Thursday. Wednesday’s formation of a daily Doji candle signaled market indecision, coupled with overbought daily studies prompting a round of partial profit-taking.
The cable faced a challenge in surpassing the 1.2719 Fibonacci barrier (61.8% of 1.3141/1.2037) in its daily close, reinforcing initial indications of a potential bull trap and heightening the risk of a pullback. Initial support is identified at 1.2655 (5DMA), followed by the ascending 10DMA at 1.2581, expected to serve as a buffer against declines to maintain the broader bullish outlook. A more substantial correction could expose pivotal support levels at 1.2466/58, marked by the convergence of the 200 and 20DMAs and the broken Fibonacci level of 38.2%.
Investors are on edge as they await the release of a key economic indicator today—the US PCE Price Index, the Federal Reserve’s preferred inflation gauge. Projections anticipate a 3.5% year-on-year and 0.2% month-on-month increase in the Core PCE for October. A figure in line with expectations may keep the dollar under pressure, but a lower-than-expected inflation rate for October could potentially accelerate the dollar’s decline.
In such a scenario, the GBP/USD pair may rally through the 1.2700/19 pivots, aiming for a test of 1.2800/18 (August 10/22 tops) and 1.2881 (Fibonacci 76.4% of 1.3141/1.2037) in an extended move. Traders are poised for potential market shifts based on the forthcoming economic data, with a keen eye on the inflation figures that may dictate the cable’s near-term trajectory.
