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GBP/USD Price Forecast: Return to $1.23 to Support a Run at $1.24

By:
Bob Mason
Published: Jun 24, 2022, 07:35 UTC

It's been a bullish morning for the GBP/USD. Better than expected retail sales figures delivered support ahead of central bank chatter later today.

GBP/USD finds early support

In this article:

It was another relatively busy morning on the UK economic calendar for the GBP/USD. Following the UK inflation and private sector PMI figures, UK retail sales drew attention this morning.

UK Retail Sales Raise Red Flags for the UK Economy and the Pound

Retail sales fell by 0.5% in May, partially reversing a 0.4% increase from April. Economists forecast a 0.7% decline.

According to the Office for National Statistics,

  • Food store sales fell by 1.6% due to higher food prices and the cost of living.
  • Automotive fuel sales volumes increased by 1.1%, while non-food store sales were flat.
  • In the three months to May 2022, retail sales fell by 1.3%, compared to the previous three months.
  • Sales volumes were 2.6% up from their pre-COVID-19 levels, however.

While the retail sales figures are unlikely to shift the Bank of England’s view on inflation and monetary policy, a marked shift in consumption could deliver the Pound with policy uncertainty.

On Wednesday, Fed Chair Powell talked of the Fed’s commitment to bring inflation to target at any cost.

Last Friday, the Bank of England Chief Economist, Huw Pill, discussed two areas that could drive the Bank of England into a more aggressive rate hike path.

Pill told Bloomberg TV,

“If we see greater evidence that the current high level of inflation is becoming embedded in pricing behavior by firms, in wage-setting behavior by firms and workers, then that will be the trigger for this more aggressive action.”

Later this morning, Bank of England Monetary Policy Committee Members Huw Pill and Jonathan Haskel are due to speak. Following this week’s stats, any views on the economy and tackling inflation will influence.

GBP/USD Price Action

At the time of writing, the Pound was up 0.07% to $1.22665.

A bearish morning saw the Pound slide to a low of $1.22403 before striking a high of $1.22849.

The GBP/USD left the Major Support and Resistance Levels untested early on.

A GBP/USD return to $1.23 to support a breakout
GBPUSD 240622 Daily Chart

Technical Indicators

The Pound will need to avoid the $1.2241 pivot to target the First Major Resistance Level at $1.2312.

A pickup in market risk appetite would support a breakout from Thursday’s high of $1.22946.

An extended rally would test the Second Major Resistance Level at $1.2366 and resistance at $1.24. The Third Major Resistance Level at $1.2490.

A fall through the pivot would bring the First Major Support Level at $1.2187 into play.

Barring an extended sell-off, the Pound should steer clear of sub-$1.2150 and the Second Major Support Level at $1.2116. The Third Major Support Level sits at $1.1992.

GBP/USD bullish early.
GBPUSD 240622 Hourly Chart

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

At the time of writing, the Pound sat above the 50-day EMA, currently at $1.22645. The 50-day EMA narrowed to the 100-day EMA. The 100-day EMA eased back from the 200-day EMA: Pound negative.

A return to $1.23 would support a run at the 100-day EMA, currently at $1.23197, to bring $1.24 into play.

In case of a GBP/USD fall through the 50-day EMA, the Pound would likely test the First Major Support Level at $1.2187.

EMAs bearish
GBPUSD 240622 4-Hourly Chart

The US Session

Economic data is on the lighter side, with finalized Michigan Consumer Sentiment figures in focus. Barring any material revisions, the numbers are unlikely to move the dial.

Following two days of Fed Chair Powell testimony, however, FOMC member chatter would draw interest.

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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