GBP/USD Forecast: Sellers await a drop below 1.3160

GBP/USD has gone into a consolidation phase near 1.3200 early Thursday after having closed in negative territory on Wednesday. The improving market mood is helping the pair hold its ground for the time being but a decline below 1.3160 could open the door for additional losses.

The sharp drop witnessed in European and US stock indices showed on Wednesday that investors were not looking to rush into a relief rally just yet. In the absence of fresh developments surrounding the Russa-Ukraine conflict, US stock index futures post modest gains early Thursday but market participants could opt to stay on the sidelines while waiting for headlines coming out of the NATO summit.

In the meantime, UK Office for Budget Responsibility (OBR) announced that it lowered the growth forecast for the 2021/2022 tax year to 3.8% from 6% previously.

IHS Markit will release the preliminary Manufacturing and Services PMI data for the UK and the US on Thursday. Investors expect the private sector business activity in the UK to expand at a softer pace than in February. Disappointing PMI figures are likely to weigh on the British pound as they could force the Bank of England (BOE) to adopt a patient stance when it comes to policy tightening. 

Later in the day, February Durable Goods Orders and weekly Initial Jobless Claims data will be looked upon for fresh impetus. More importantly, several FOMC members, including Atlanta Fed President Raphael Bostic and Fed Governor Christopher Waller, will be delivering speeches. Since the beginning of the week, hawkish Fed commentary has been helping the dollar outperform its rivals by lifting US T-bond yields higher and a similar market reaction could be witnessed in the second half of the day.

GBP/USD Technical Analysis

The near-term technical outlook doesn't provide any directional clues. In order to attract bulls, GBP/USD needs to reclaim 1.3200 (psychological level, Fibonacci 50% retracement of the latest downtrend) and start using that level as support. In that case, the pair could regain its traction and eye 1.3250 (Fibonacci 61.8% retracement) and 1.3300 (psychological level, weekly high).

On the downside, key support aligns at 1.3160 (Fibonacci 38.2% retracement, 100-period SMA on the four-hour chart). With a four-hour close below that level,  1.3100 (psychological level) could become the next bearish target.