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GBP/USD Price Forecast: A return to $1.22 to Bring $1.2350 into View

By:
Bob Mason
Published: Aug 1, 2022, 07:32 UTC

July manufacturing PMIs are in focus today. Following weak numbers from China, risk aversion could see the GBP/USD pair come under early pressure.

GBP 4

In this article:

It is a quiet morning on the UK economic calendar. Finalized manufacturing PMI numbers for July will be in focus later this morning. The markets will be looking for any material deviation from the prelim survey.

However, barring a material revision to the prelim numbers, the PMI should have a muted impact on the Pound. Market interest in the services PMI, due on Wednesday, will be more material for the Pound and the BoE.

With investors looking ahead to Thursday’s monetary policy decision, MPC member chatter will also draw plenty of interest. However, there are no scheduled MPC member speeches until Thursday’s Bank of England press conference.

Earlier in the day, China’s Caixin Manufacturing PMI for July set the tone to test support for riskier assets and the GBP/USD pair.

In July, the Caixin Manufacturing PMI fell from 51.7 to 50.4 versus a forecast of 51.5. Avoiding a contraction provided some degree of market comfort.

GBP/USD Price Action

At the time of writing, the Pound was up by 0.18% to $1.21921

This morning, the Pound fell to an early low of $1.21566 before rising to a high of $1.21997.

GBP/USD finds early support
GBPUSD 010822 Daily Chart

Technical Indicators

The Pound will need to avoid the $1.2160 pivot to bring the First Major Resistance Level (R1) at $1.2256 into play.

The GBP/USD pair would need a marked pickup in risk sentiment to support a breakout from the Friday high of $1.22453.

In the event of an extended rally, the GBP/USD pair would test resistance at $1.23 and the Second Major Resistance Level (R2) at $1.2342.

The Third Major Resistance Level (R3) sits at $1.2525.

A fall through the pivot would likely see the Pound test the First Major Support Level (S1) at $1.2074 and support at $1.20.

In case of an extended sell-off, the GBP/USD pair could test the Second Major Support Level (S2) at $1.1977.

The Third Major Support Level (S3) sits at $1.1794.

GBP resistance in play
GBPUSD 010822 1 Hour Chart

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal.

At the time of writing, the Pound sat above the 200-day EMA, currently at $1.21106.

The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering positive signals.

A narrowing of the 50-day EMA to the 200-day EMA should support a move through R1 to target $1.23 and R3.

However, a fall through the 200-day EMA would test support at the 50-day EMA, currently at $1.20774, and S1.

EMAs bullish
GBPUSD 010822 4-Hourly Chart

The US Session

It is a relatively busy US economic calendar.

The ISM Manufacturing PMI will draw interest. After the disappointing US GDP numbers, we can expect market sensitivity to any weak PMI figures.

The finalized Markit survey-based Manufacturing PMI is also due out but should have a muted impact on the pair.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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