GBP/USD Forecast: Battered Pound at risk of falling further

Valeria Bednarik FXStreet

GBP/USD Current price: 1.2235

The UK Markit PMIs bounced in May, but continue to indicate the steeper pace of contraction on record.
Retail Sales in the kingdom expected to have fallen by 16% in April.
GBP/USD tuned neutral in the short-term could accelerate its decline once below 1.2170

The GBP/USD pair started the day on the backfoot, although it met buyers at 1.2185, to end the day pretty much unchanged in the 1.2230 area. Comments from BOE’s Governor Bailey, saying that the central bank is considering negative interest rates as an option weighed on the Pound, overshadowing better-than-expected UK data. The preliminary estimates of the Markit PMIs for May were better than anticipated, with the manufacturing index rising to 40.6 and the services PMI printing at 27.8. Still, the numbers indicate that the pace of contraction is the steeper on record.

The UK also published the CBI Industrial Trends Survey on orders, which fell to a record low of -62 in April. This Friday, the kingdom will unveil April Retail Sales, seen falling by 16% in the month, and by 22.2% when compared to a year earlier.

GBP/USD short-term technical outlook

The GBP/USD pair has bottomed near a Fibonacci support level at 1.2170, and as long as the pair remains above the level chances of a bearish move are limited. In the 4-hour chart, the pair is battling around a still bullish 20 SMA, but technical indicators are stuck directionless around their midlines. The 100 SMA is gaining bearish strength, currently at around 1.2330, suggesting an increasing selling interest.

Support levels: 1.2205 1.2170 1.2130

Resistance levels: 1.2285 1.2310 1.2350

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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