GBP/USD Price Analysis: Faces a wall of resistance around 1.2600 and retraces towards 1.2530s

• Cable pares some of Monday’s gains and retraces towards the 1.2530s region.
• Risk-aversion and weaker than the expected UK PMIs weighed on the GBP/USD.
• GBP/USD Price Forecast: A daily close below 1.2600 to leave exposed the major to additional selling pressure.

The British pound shifted to the defensive as sentiment shifted sour and weighed by weaker than expected UK PMIs, which dragged the major from weekly highs at around 1.2600 towards the 1.2530s area. At 1.2536, the GBP/USD is trimming some of Monday’s gains and is down 0.40%.

The mood remains dampened, spurred by concerns about the US economy falling into a recession. The Federal Reserve is on a hiking cycle, tightening its monetary policy, which according to money market futures, would see the Fed hiking towards the 2.75-3% area by the end of the year.

Another factor that is weighing on is China’s Covid-19 crisis. Reports over the weekend illustrated that Beijing is struggling to cap the spread. Meanwhile, Shanghai, which was about to lift restrictions, witnessed another outbreak, though not as at the beginning of the last episode.

Elsewhere, the GBP/USD opened near the daily high around 1.2600 but fell and broke below the central and S1 daily pivot points, near the 1.2480s. Nevertheless, towards the end of the European session, the major is treading water and is aiming towards the 50-hour simple moving average (SMA) at 1.2542.

GBP/USD Price Forecast Technical outlook

From a technical perspective, the GBP/USD remains downward biased, despite bouncing 300 pips from the YTD low to current levels. The 1.2600 mark probes to be a solid resistance, as the GBP/USD bulls struggled twice to reclaim the figure, which would have opened the door for an upward move towards the May 4 swing high at 1.2638. However, a daily close below 1.2600 would leave the pair vulnerable to additional selling pressure, further validated by the RSI at 48.69, within the negative territory and aiming lower.

That said, the GBP/USD first support would be the psychological 1.2500 figure. A breach of the latter would expose July 2020 lows near 1.2479, followed by the May 17 daily low at 1.2313 and the YTD low at 1.2155.

Key Technical Levels