GBP to USD Faces Risk of Sub-$1.19 Ahead of Central Bank Chatter

It is a quiet day for the GBP/USD. There are no UK economic indicators to provide the Pound with direction.

In the early part of the day, market risk sentiment will influence, with private sector PMIs from China to set the tone. A more marked contraction in private sector activity, coupled with the latest wave of new COVID-19 cases, would test the appetite for the Pound.

Through the European session, the lack of stats will leave Bank of England commentary to influence ahead of a busy US economic calendar.

Later today, Monetary Policy Committee member and Chief Economist Huw Pill will speak. In recent speeches, Huw Pill has maintained the need for further monetary policy tightening to bring inflation to target. Hawkish comments would provide the GBP/USD with support.

GBP/USD Price Action

At the time of writing, the Pound was up 0.02% to $1.19540.

Technical Indicators

The Pound needs to move through the $1.1987 pivot to target the First Major Resistance Level (R1) at $1.2029 and the Tuesday high of $1.20642. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2106. The Third Major Resistance Level (R3) sits at $1.2225.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1909 in play. However, barring an extended risk-off-fueled pullback, the GBP/USD should avoid sub-$1.18. The Second Major Support Level (S2) at $1.1868 should limit the downside.

The Third Major Support Level (S3) sits at $1.1748.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits at the 50-day EMA, currently at $1.19582. The 50-day EMA flattened on the 100-day EMA, while the 100-day EMA widened from the 200-day EMA, delivering mixed signals.

A breakout from the 50-day EMA ($1.19582) would support a move through R1 ($1.2029) to target $1.21. However, failure to move through the 50-day EMA ($1.19582) would likely see the Pound fall through S1 ($1.1909) to bring S2 ($1.1868) and the 100-day EMA ($1.18400) into view.

The US Session

It is a busy day ahead, with ADP employment change and JOLTs job openings the main stats of the day. An upbeat ADP report could refuel bets of a more hawkish December Fed rate hike.

Late in the US session, Fed Chair Powell will take center stage. Strong labor market conditions and the current inflation environment leave another 75-basis point rate hike on the table.

Other stats include Q3 GDP and housing sector numbers that should have less influence on the GBP/USD.