GBP/USD Forecast: Pressure persist despite an intraday recovery
|GBP/USD Current price: 1.2319
- UK Services output and manufacturing output seen contracting further in April.
- Brexit talks resumed, rumours surged on whether an extension is likely or not.
- GBP/USD recovered the 1.2300 level, but the risk remains skewed to the downside.
The GBP/USD pair advanced throughout the first half of the day, as the Pound was underpinned by the improved market’s mood. Speculative interest returned to the greenback during US trading hours, which resulted in the pair settling with modest gains just above the 1.2300 figure. UK March inflation figures helped Sterling, as the CPI came in at 1.5% YoY as expected, while the core annual reading printed at 1.6%, also matching the markets forecast. Producer Prices in the same period fell less than anticipated, while the Retail Price Index was up by 2.6%.
Meanwhile, Brexit talks have resumed this week. Talks were making the rounds suggesting a divided opinion within the UK’s negotiation team over whether to seek or not for an extension beyond December 31. The government have stated multiple times that an extension is out of the table, but the coronavirus crisis has come in the way. UK PM Johnson is still recovering and not participating in government. Markit will release this Thursday the preliminary estimate of the UK April Services PMI, foreseen at 29 from 34.5 previously, and the Manufacturing PMI, expected at 42 from 47.8 in March. The kingdom will also publish the GFK Consumer Confidence Index, expected at -40 in April from -9 in March.
GBP/USD Technical Outlook
The GBP/USD pair maintains a neutral-to-bearish stance in the short-term, despite its modest intraday advance. It is currently trading around the 50% retracement of its March decline, hovering around the level for a second consecutive day. The 4-hour chart shows that the price remains below all of its moving averages, which are confined to a tight range, reflecting the lack of directional strength. Technical indicators, in the meantime, remain directionless within negative levels.
Support levels: 1.2275 1.2230 1.2185
Resistance levels: 1.2350 1.2390 1.2440
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