GBP/USD Price Forecast: Bulls Eye a Return to $1.20 on Strong Data

It was a busy morning for the Pound, with UK GDP, industrial and manufacturing production, and trade data in focus. The numbers were Pound positive.

In May, the UK economy expanded by 0.5%, reversing a 0.2% contraction from April. Economists had forecast 0.1% growth. Quarter on quarter, the economy grew by 0.4%, slowing from 0.8% growth in the three months to April.

Year-on-year, the economy expanded by 3.5% down from 3.7% in the 12 months to April. Economists had forecast growth of 2.7%.

More significantly, industrial production rose by 0.9% in May, reversing a 0.1% decline from April. Manufacturing production jumped by 1.4%, reversing a 0.6% fall from April. Economists had forecast production increases of 0.2% and 0.1%, respectively.

According to the Office for National Statistics,

• Manufacturing saw widespread growth, with 12 from 13 sub-sectors contributing to growth.
• However, industrial production remained 0.5% below February 2020.

The stats delivered strong GBP support, with the pickup in economic activity giving the BoE wriggle room to tackle inflationary pressures.

GBP/USD Price Action

At the time of writing, the Pound was up 0.31% to $1.19208.

This morning, the Pound fell to an early low of $1.18699 before rallying to a high of $1.19359.

The Pound tested the First Major Resistance Level at $1.1931 in response to the stats.

Technical Indicators

Avoiding the $1.1869 pivot would bring the First Major Resistance Level (R1) at $1.1931 back into play.

The GBP/USD pair would need a marked pickup in risk sentiment to support a return to $1.1930.

In the event of an extended rally, the GBP/USD pair would test the Second Major Resistance Level (R2) at $1.1978 and resistance at $1.20.

The Third Major Resistance Level (R3) sits at $1.2086.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1823 into play.

In case of an extended sell-off, the GBP/USD pair could test the Second Major Support Level (S2) at $1.1761 and support at $1.1750.

The Third Major Support Level (S3) sits at $1.1652.

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

At the time of writing, the Pound sat below 50-day EMA, currently at $1.19855.

The 50-day EMA slipped back from the 100-day EMA. The 100-day EMA fell back from the 200-day EMA: GBP/USD negative.

A move back through R1 would support a run at R2 and the 50-day EMA.

The US Session

It is a big day ahead, with US inflation figures due today. Following the FOMC meeting minutes and nonfarm payrolls, another spike in inflation would support a 75-basis point rate hike this month.

Economists forecast the annual rate of inflation to pick up from 8.6% to 8.8% in June.