GBP/USD Forecast: 1.2500 mark now seems to be the next relevant bullish target

The GBP/USD pair witnessed some intraday selling on Friday and dipped to sub-1.2300 levels in reaction to not so optimistic Brexit-related headlines. De Rynck, an adviser to EU chief Brexit negotiator Michel Barnier, talked down reports on fisheries from earlier in the week and said that there is no appetite on the EU side to revise the mandate on fisheries. De Rynck further added that it is a tall order to get an agreement on fisheries by the deadline and we must find space for compromise.

However, the continuous offered tone surrounding the US dollar assisted the pair to regain some positive traction. The optimism over re-opening of economies across the world and hopes of a sharp V-shaped recovery for the global economy helped offset concerns about heightened tensions between the United States and China, especially after the latter moved to tighten control over Hong Kong. This, in turn, undermined the greenback's relative safe-haven status and extended some support to the major.

However, some repositioning trade ahead of the US President Donald Trump's reaction to China's security law for Hong Kong led to a late pullback of around 50 pips. Nevertheless, the pair ended with strong weekly gains and managed to gain some follow-through traction on the first day of a new trading week. Investors breathed a sigh of relief after Trump began the process of ending Hong Kong's special status but did not withdraw from the US-China phase-one trade deal. This coupled with signs of recovery in the Chinese economy from the coronavirus pandemic remained supportive of the upbeat market mood.

China's official data released on Sunday showed that country's manufacturing sector activity remained in the expansion territory in May, which continue denting demand for the safe-haven USD. Adding to this, widespread riots in the US, following George Floyd's death at the hands of Minneapolis police, further pressured the greenback and lifted the pair to three-week tops – levels just above the 1.2400 round-figure mark – during the Asian session on Monday.

Moving ahead, market participants now look forward to the final version of the UK Manufacturing PMI for some impetus. Later during the early North American session, the release of the US ISM Manufacturing PMI will influence the USD price dynamics and produce some meaningful trading opportunities on the first day of a rather busy week.

Short-term technical outlook

From a technical perspective, the pair already seems to have found acceptance above the 1.2360-75 confluence region and seems all set to prolong its appreciating move. Bulls might now aim to test the 61.8% Fibonacci level of the 1.2644-1.2076 downfall, around the 1.2430-40 region, above which the pair is likely to dart towards reclaiming the key 1.2500 psychological mark.

On the flip side, the mentioned confluence resistance breakpoint – comprising of 200-period SMA on the 4-hourly chart and 50% Fibo. level – now seems to protect the immediate downside. Failure to defend the mentioned support might prompt some technical selling, through any subsequent fall might still be seen as a buying opportunity and help limit the downside near the 1.2300-1.2290 support area.