GBP to USD Forecasts: A Return to $1.21 in the Hands of the BoE

It is a relatively quiet day ahead for the GBP/USD. Early in the UK session, UK house price numbers for January will be in the spotlight. In December, UK house prices fell for the fourth consecutive month, with inflation and mortgage costs weighing. The mini-budget and Bank of England monetary policy pushed mortgage rates higher, impacting affordability and the housing sector.

Economists forecast the Halifax House Price Index to fall by 0.8% in January, following a 1.5% decline in December.

While the house price numbers will provide direction, investors should consider Monetary Policy Committee Member speeches. MPC members Dave Ramsden, Huw Pill, and Sir Jon Cunliffe will speak today.

We expect GBP/USD sensitivity to inflation chatter and monetary policy forward guidance.

GBP/USD Price Action

At the time of writing, the Pound was up 0.01% to $1.20192. A mixed start to the day saw the GBP/USD fall to an early low of $1.20132 before rising to a high of $1.20201.

Technical Indicators

The Pound needs to move through the $1.2033 pivot to target the First Major Resistance Level (R1) at $1.2062 and the Monday high of $1.20774. A return to $1.2050 would signal an extended breakout session. However, the Pound would need a hawkish MPC member chatter to support a breakout session.

In the event of an extended rally, the GBP to USD would likely test the Second Major Resistance Level (R2) at $1.2106. The Third Major Resistance Level sits at $1.2178.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1989 in play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.1950. The second Major Support Level (S2) at $1.1961 should limit the downside.

The Third Major Support Level (S3) sits at $1.1889.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 200-day EMA, currently at $1.22031. The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing the 200-day EMA, delivering bearish signals.

A bearish cross of the 50-day EMA through the 200-day EMA would support a fall through S1 ($1.1989) to target S2 ($1.1961). However, a move through the pivot ($1.2033) would give the bulls a run at R1 ($1.2062) and $1.21.

The US Session

It is a quiet day on the US economic calendar. US trade data for December will draw interest early in the US session. However, there would need to be a marked widening in the US trade deficit to spook investors. With US stats on the lighter side, post-US Jobs Report FOMC member chatter will need consideration.