GBP/USD Forecast: Sustained break below 1.2200 mark will set the stage for additional weakness

The GBP/USD pair extended the previous session's rejection slide from the 1.2475 supply zone and witnessed some selling on the last trading day of the week. Against the backdrop of a sustained buying around the US dollar, the pair was further pressurized by a downward revision of the UK services PMI. A sharper-than-anticipated contraction in the UK services sector activity comes amid a nationwide lockdown and undermined the British pound.

On the other hand, the greenback maintained its bid tone following the release of the US monthly jobs report, which showed that the economy lost 701K jobs in March and the unemployment rate jumped to 4.4% from 3.4%. The data further illustrated the extent of the economic fallout from the coronavirus pandemic and continued benefitting the USD's perceived safe-haven status against its British counterpart.
Separately, the US ISM Non-Manufacturing PMI surprised positively and came in at 52.5 as against market expectations for a drop to 44.

The pair dropped to fresh weekly lows, albeit managed to find some support ahead of the 1.2200 round-figure mark. The pair recorded its third week of a negative move in the previous four and remained on the defensive through the Asian session on Monday. Reports that the UK Prime Minister Boris Johnson has been hospitalized after suffering persistent coronavirus symptoms for 10 days, combined with a continuous rise in the number of deaths in the UK took its toll on the sterling. The downside, however, remained limited, at least for the time being, amid a goodish recovery in the global risk sentiment.

Moving ahead, market participants now look forward to the release of the final UK Construction PMI for some short-term trading impetus amid absent relevant market-moving economic data from the US. Apart from this, developments surrounding the coronavirus saga, which remains a key determinant of the broader market sentiment, might influence the USD price dynamics and further contribute towards producing some meaningful trading opportunities.

Short-term technical outlook

From a technical perspective, the convergence of 50-day SMA and 200-day SMA points to the increasing possibility of a bearish death-cross on the daily chart. The set-up indicates that the recent strong recovery from 35-year lows might have already run out of the steam and thus, supports prospects for the resumption of the pair's prior/well-established bearish trend.

However, it will be prudent to wait for a sustained break below the 1.2200 round-figure mark before positioning for a further near-term depreciating move towards challenging the 1.2100 mark en-route the 1.2075-70 support zone. The latter coincides with 38.2% Fibonacci level of the recent rally and should now act as a key pivotal point for short-term traders.

On the flip side, the 1.2300 round-figure mark now seems to act as immediate resistance and any subsequent positive move is likely to confront some fresh supply near the 1.2375-80 region. Some follow-through buying, leading to a move beyond the 1.2400 mark, has the potential to lift the pair further, though seems more likely to remain capped near the 1.2475-85 strong resistance zone.