GBP to USD Forecasts: A Quiet Calendar Brings Sub-$1.2150 into View

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

The lack of stats will leave the GBP/USD in the hands of market risk sentiment and the greenback.

Wednesday’s choppy session saw GBP/USD sensitivity to weak trade data from China and the Putin nuclear warning. However, despite China’s stats stoking fears of a global recession and the Putin warning, the Pound found strong support to wrap up the day at $1.22081.

The recovery aligns with the market expectation of a Fed pivot, which would remove monetary policy divergence that had favored the dollar. Currently, the markets expect the Fed and the BoE to deliver 50 basis point rate hikes next week.

The markets may need to wait for stats from the UK and the US next week to question the current policy bets. There will also be the FOMC Economic and interest rate projections to provide further guidance. While monetary policy divergence has narrowed, the US economy is in a stronger position.

With market sentiment toward monetary policy supporting the Pound, BoE commentary will need monitoring. However, there are no Bank of England Monetary Policy Member speeches for the markets to consider. The lack of chatter will leave member chatter with the media to influence ahead of the US session.

GBP/USD Price Action

At the time of writing, the Pound was down 0.08% to $1.21981. A mixed start to the day saw the GBP/USD rise to an early high of $1.22132 before falling to a low of $1.21961.

Technical Indicators

The Pound needs to avoid the $1.2183 pivot to target the First Major Resistance Level (R1) at $1.2260. Risk-on sentiment would support a breakout from the Wednesday high of $1.22344 to signal a bullish session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2311. The Third Major Resistance Level (R3) sits at $1.2439.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2131 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.21 and the Second Major Support Level (S2) at $1.2055.

The Third Major Support Level (S3) sits at $1.1927.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.21352. The 50-day EMA moved away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above the 50-day EMA ($1.21352) would support a move through R1 ($1.2260) to target R2 ($1.2311). However, a GBP/USD fall through the 50-day EMA ($1.21352) and S1 ($1.2131) would bring S2 (1.2055) into view. The 200-day EMA sits at $1.18361.

The US Session

It is a quiet day ahead, with weekly jobless claims figures in focus. However, barring a significant move from current levels, the numbers are unlikely to impact market sentiment toward Fed monetary policy and the GBP/USD.

The markets are still betting on a December Fed pivot, despite the latest US Jobs Report and ISM Non-Manufacturing PMI. A sharp fall to sub-200k levels could raise bets of another hawkish interest rate hike.

According to the FedWatch Tool, the probability of a 75-basis point December rate hike rose from 21.8% to 25.3%. However, no FOMC members are influencing the reading. The Fed entered the blackout period on Sunday.