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GBP/USD Price Forecast: Risk Aversion to Test the Pound at $1.2050

For the Pound, it is a relatively quiet end to the week on the UK economic calendar. Finalized UK manufacturing PMI numbers for June are due out later this morning.

According to the prelim numbers, the manufacturing PMI fell from 54.6 to 53.4 in June. Any downward revisions would add further pressure on the GBP/USD pair.

Following central bank chatter from earlier in the week, there are no Bank of England Monetary Policy Committee members due to speak ahead of a busy BoE calendar next week.

Later in the day, however, US economic data will also draw greater attention, with the ISM Manufacturing PMI for June due out.

However, the numbers will need to impress to shift market risk appetite through the US session.

GBP/USD Price Action

At the time of writing, the Pound was down 0.45% to $1.21212.

This morning, the Pound rose to an early high of $1.21784 before sliding to a low of $1.21108.

The Pound tested the First Major Support Level at $1.2115 early on.

GBPUSD 010722 Daily Chart
GBPUSD 010722 Daily Chart

Technical Indicators

The Pound will need to move through the $1.2152 pivot to target the First Major Resistance Level (R1) at $1.2212.

A shift in market risk appetite would support a breakout from the Thursday high of $1.21882.

An extended rally would test the Second Major Resistance Level (R2) at $1.2248 and resistance at $1.2250. The Third Major Resistance Level (R3) sits at $1.2345.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2115 in play.

Barring an extended sell-off, the Pound should steer clear of sub-$1.20. The Second Major Support Level (S2) at $1.2055 should limit the downside. The Third Major Support Level (S3) sits at $1.1959.

GBPUSD 010722 Hourly Chart
GBPUSD 010722 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 below 50-day EMA, currently at $1.22092. 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 move through the 50-day EMA would support a run at R2.

However, following the Wednesday GBP/USD fall through the 50-day EMA, the Pound will need to steer clear of sub-$1.21 to extend the Thursday 0.48% gain.

The US Session

It is a quieter US session, with manufacturing sector PMI numbers due out. Expect the ISM Manufacturing PMI for June to have limited influence on the GBP/USD pair.

There are no FOMC members due to speak.

This article was originally posted on FX Empire