GBP/USD Forecast: Pound Sterling closes in on key 1.2800 support
- GBP/USD turned south and dropped to a fresh two-week low on Monday.
- 1.2800 aligns as an important technical level for the pair.
- Markets await July S&P Global PMIs from the US.
GBP/USD turned south in the European session on Monday and dropped to its lowest level in two weeks below 1.2810. The pair's technical outlook points to a bearish bias as investors await S&P Global PMI surveys for the US.
S&P Global/CIPS Manufacturing PMI for the UK dropped to 45 in July's flash estimate from 46.5 in June. Additionally, the Services PMI declined to 51.5 from 53.7, unveiling a loss of momentum in the services sector's business activity.
Assessing the survey's findings, “the UK economy has come close to stalling in July which, combined with gloomy forward-looking indicators, reignites recession worries," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Pound Sterling has been struggling to find demand after the data from the UK showed last week a noticeable softening of inflation in June. Disappointing PMIs keep hawkish Bank of England (BoE) bets at bay and don't allow GBP/USD to gain traction early Monday.
In the second half of the day, PMI surveys from the US are forecast to show an ongoing contraction in the manufacturing sector and a healthy expansion in the service sector. Unless PMI data come in much worse than anticipated, GBP/USD could have a difficult time staging a decisive rebound.
GBP/USD Technical Analysis
The Relative Strength (RSI) indicator on the four-hour chart is yet to cross below 30, suggesting that GBP/USD has more room on the downside before turning technically oversold. 1.2800 (Fibonacci 61.8% retracement of the latest uptrend) aligns as first support before 1.2775 (200-period SMA) and 1.2750 (static level).
Looking north, 1.2870, (Fibonacci 50% retracement, 20-period Simple Moving Average (SMA), 50-period SMA) before 1.2900 (psychological level, static level) and 1.2930 (Fibonacci 38.2% retracement).
Premium
You have reached your limit of 3 free articles for this month.
Start your subscription and get access to all our original articles.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
