GBP/USD Forecast: Sellers could take action if 1.2370 support fails

• GBP/USD has retreated to the 1.2400 area following mixed UK data on Friday.
• The pair faces key near-term support at 1.2370.
• S&P Global PMI surveys from the US will ve watched closely by market participants.

GBP/USD has started the last trading day of the week on the back foot and declined toward 1.2400. The pair's technical outlook points to a buildup of bearish momentum. 1.2370 aligns as key support and sellers could take action if that level fails. 

The UK's Office for National Statistics reported early Friday that Retail Sales in March declined by 0.9% following February's growth of 1.1%. This reading came in weaker than the market expectation for a decrease of 0.5% and caused GBP/USD to edge lower in the European morning.

On a positive note, S&P Global/CIPS Composite PMI in the UK improved to 53.9 in April from 52.2 in March despite a modest decline recorded in Manufacturing PMI.

Commenting on the data, "the fastest rebound in private sector output in a year showed businesses were enjoying the pockets of recovery emerging in the UK economy and activity levels leapt up as a result of new orders and improved supply chain performance," said Dr John Glen, CIPS Chief Economist. "However, the difference between the manufacturing and service sectors was stark."

S&P Global will release the preliminary April PMI surveys for the US later in the day. Markets grow increasingly concerned over a significant slowdown in the US economic activity. If the Composite PMI arrives below 50 and reveals a contraction in private sector's business activity, the US Dollar is likely to come under renewed selling pressure ahead of the weekend. On the other hand, a reading comfortably above 50 with the survey commentary pointing to strong price pressures and healthy employment conditions, should weigh on GBP/USD by providing a boost to the USD.

GBP/USD Technical Analysis

GBP/USD closed the last four-hour candle below the 100-period and the 50-period Simple Moving Averages (SMA). Furthermore, the Relative Strength Index (RSI) indicator on the same chart dropped below 50 early Friday, pointing to a buildup of bearish momentum.

Below 1.2400 (psychological level, static level), 1.2370 (Fibonacci 23.6% retracement of the latest uptrend) aligns as immediate support before 1.2300 (psychological level, static level, 200-period SMA).

GBP/USD needs to flip 1.2430 (50-period SMA, 100-period SMA) into support in order to attract bulls. In that scenario, 1.2470 (lower limit of the broken ascending regression channel) could be seen as the next resistance before 1.2500.