• A modest pickup in the USD demand led to the initial leg of the intraday pullback.
• Softer-than-expected US CPI figures exerted some additional pressure on the pair.
• The downside is likely to remain limited ahead of the much-awaited FOMC decision.

The GBP/USD pair held on to its weaker tone through the early European session on Wednesday and dropped to fresh session lows, below mid-1.2400s post-UK CPI.
 
Despite the overnight positive move to fresh multi-week tops, the pair continued with its struggle to sustain above the key 1.2500 handle and witnessed a modest intraday pullback on Wednesday amid a pickup in the US Dollar demand.

Softer UK CPI exerts some pressure

The retracement slide accelerated further following the release of softer-than-expected UK consumer inflation figures, showing that the headline CPI eased more-than-expected to 1.5% yearly rate in August as compared to 2.1% previous.
 
On a monthly basis, the price of goods and services purchased by consumers rose less-than-expected - 0.4% vs. 0.5% expected - and exerted some pressure on the pair, which has now eroded a major part of the previous session's positive move.
 
Meanwhile, the downside is likely to remain limited as the focus remains firmly on the highly anticipated FOMC monetary policy decision, due to be announced later during the North-American session.

Hence, it will be prudent to wait for a strong follow-through selling before confirming that the pair might have topped out in the near-term and positioning for an extension of the ongoing corrective slide back towards the 1.2400 handle.

Technical levels to watch