GBP/USD Price Forecast: The Pound Sits in the Hands of the BoE

Following a quiet start to the week for the Pound, it is a busier day ahead on the UK economic calendar.

Finalized service and composite PMI numbers for June caught market interest early in the session.

In June, the UK services PMI rose from 53.4 to 54.3 versus a prelim 53.4. As a result, the composite PMI increased from 53.1 to 53.7 versus a prelim 53.1.

According to the finalized June survey,

• While the PMI reflected a sharp increase in business activity, demand conditions weakened.
• New orders increased at the slowest pace since February 2021, with firms attributing concerns over the cost of living and jitters over the economic outlook as contributory factors.
• Business expectations also took a hit due to inflationary pressures and weak demand. Optimism fell to its lowest level since May 2020.

While the stats drew market interest, the live stream of the Bank of England Financial Stability Report will have more impact on the GBP/USD pair. The live streak is due to take place at 1030 am BST.

Later in the day, Silvana Tenreyro is also due to speak at the Qatar Centre for Global Banking and Finance 2022 Conference. Following recent UK economic indicators, any comments on the UK economy and monetary policy will provide direction.

GBP/USD Price Action

At the time of writing, the Pound was down 0.45% to $1.20494.

This morning, the Pound rose to an early high of $1.21248 before falling to a low of $1.20494.

The Pound fell through the First Major Support Level (S1) at $1.2070.

Technical Indicators

A GBP/USD move through S1 and the $1.2118 pivot would bring the First Major Resistance Level (R1) at $1.2151 into play.

Today’s financial stability report will need to support a return to $1.21, with market risk sentiment also of influence.

An extended rally would test the Second Major Resistance Level (R2) at $1.2199 and resistance at $1.22. The Third Major Resistance Level (R3) sits at $1.2280.

Failure to move through S1 and the pivot would bring the Second Major Support Level (S2) at $1.2037 into play.

In the event of an extended sell-off, the Third Major Support Level (S3) at $1.1956 would also come into play.

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 $1.21648.

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

A return to $1.21 would support a run at R1 and the 50-day EMA to bring $1.22 levels into play.

However, following the Wednesday GBP/USD fall through the 50-day EMA, the Pound will need to move through S1 and the pivot to avoid testing support at $1.20.

The US Session

US factory orders will influence market risk sentiment later in the day. Weak numbers could test support for the GBP/USD pair.