Sterling Recovery Hits Key Resistance

The pair will likely keep falling as bears target the key resistance at 1.2000.

Bearish View

• Sell the GBP/USD pair and set a take-profit at 1.200.
• Add a stop-loss at 1.2200.
• Timeline: 1-2 days.

Bullish View

• Set a buy-stop at 1.2166 and a take-profit at 1.2250.
• Add a stop-loss at 1.2100.

The GBP/USD price continued in a consolidation phase as investors waited for a statement by Bank of England’s Andrew Bailey and the release of the country’s financial stability report. The pair is trading at 1.2100, which is slightly below Monday’s high of 1.2166.

Andrew Bailey Statement

The GBP/USD will be in the spotlight as Bank of England’s Andrew Bailey, the head of the BOE. He will speak as the bank launches the financial stability report that will provide more information about the economy and the banking sector.

Bailey will likely not make any new news in his speech. In an ECB event last week, he lamented that the UK economy was weakening at a rapid rate than anticipated. Indeed, the economy contracted in April and May and analysts expect that it declined in Q2.

Other leading economic data have sent warnings about the economy. For example, numbers by the Nationwide Society revealed that the house price index declined in June as mortgage rates jumped. Further data by Gfk showed that the country’s consumer confidence declined sharply as consumer inflation surged.

The GBP/USD pair will also react to the upcoming UK services and composure PMI numbers. These are important leading indicators that provide a gauge about the country’s economy. Based on the flash estimates published recently, analysts expect the data to show that the services PMI dropped to 53.4 while the composite on fell to 53.1. Still, since the PMI is above 50, it is a sign that output in the country is still strong.

The pair will also react to the reopening of Wall Street since American markets were closed on Monday for Independence Day celebrations. The next important catalyst for the GBP/USD price will be the upcoming American jobs data.

GBP/USD Forecast

The 4H chart reveals that the GBP/USD pair formed a break and retest pattern. It retested the important resistance level of 1.2166, which was the lowest point on June 23rd. The pair remained below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) remains slightly below the neutral point at 50.

Therefore, the pair will likely keep falling as bears target the key resistance at 1.2000. A move above the resistance at 1.2166 will invalidate the bearish view.