GBP/USD Forecast: Sellers could take action with a drop below 1.1920

After having dropped toward 1.1900 amid renewed dollar strength in the early European session, GBP/USD has staged a rebound. The near-term technical outlook, however, doesn't yet point to a bullish tilt and sellers could take action if the pair falls below 1.1920.

The negative shift witnessed in risk sentiment helped the dollar gather strength on Friday. EUR/USD's sharp drop after disappointing data provided an additional boost to the greenback and caused GBP/USD to turn south.

The upbeat PMI surveys from the UK, however, helped GBP/USD find support. S&P Global's Composite PMI for the UK arrived at 52.8 in July's flash estimate, surpassing the market expectation of 52.5, and the Manufacturing PMI came in at 52.2, compared to analysts' estimate of 52. Although this data is hardly encouraging, it reminded investors of the fact that the UK economy is in a better position overall than the European economy.

Commenting on the data, "UK economic growth slowed to a crawl in July, registering the slowest expansion since the lockdowns of early-2021," noted Chris Williamson, Chief Business Economist at S&P Global Market Intelligence."Although not yet in decline, with pent-up demand for vehicles and consumer-oriented services such as travel and tourism helping to sustain growth in July, the PMI is now at a level consistent with just 0.2% GDP growth."

Later in the day, the US PMI data will be looked upon for fresh impetus. In case these surveys show that the business activity in the US private sector continued to expand at a healthy pace in July, the dollar could end the week on a strong note. On the other hand, weaker-than-expected PMI prints could force investors to move away from the greenback ahead of next week's highly-anticipated FOMC meeting.

GBP/USD Technical Analysis

1.1920 (Fibonacci 23.6% retracement of the latest downtrend, 50-period SMA) aligns as key support for GBP/USD. With a four-hour close below that level, additional losses toward 1.1900 (psychological level) and 1.1800 (end-point of the downtrend, psychological level) could be witnessed.

On the other hand, resistances are located at 1.1975 (20-period and 50-period SMAs), 1.2000 (psychological level, Fibonacci 38.2% retracement) and 1.2060 (Fibonacci 50% retracement).