GBP to USD Forecasts: A Return to $1.2350 US Jobs Report Dependent
It is a relatively busy day ahead for the GBP/USD. Early in the UK session, finalized services and composite PMI numbers will be in focus. While revisions to the headline numbers will influence, investors need to consider the sub-components, including job creation, new orders, and input and output prices.
On Thursday, BoE Governor Andrew Bailey spoke about seeing the first indications of inflation turning the corner, leaving the GBP/USD exposed to inflation indicators over the near term. Bailey’s comments aligned with Bank’s the monetary policy meeting minutes that dropped the word “forcefully” in tackling inflation.
While the private sector PMI numbers and sub-components will provide direction, investors should consider Monetary Policy Committee Member speeches. Today, Bank of England Chief Economist Huw Pill will speak at a Monetary Policy Report National Agency briefing. 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 flat at $1.22242. A mixed start to the morning saw the GBP/USD fall to an early low of $1.22220 before steadying.
The Pound needs to move through the $1.2282 pivot to target the First Major Resistance Level (R1) at $1.2343 and the Thursday high of $1.24012. A return to $1.23 would signal an extended breakout session. However, the Pound would need a GBP-friendly US Jobs Report 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 $1.2461. The Third Major Resistance Level sits at $1.2640.
Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2164 in play. However, barring a US Jobs Report-fueled sell-off, the GBP/USD should avoid sub-$1.2150 and the second Major Support Level (S2) at $1.2103.
The Third Major Support Level (S3) sits at $1.1924.
Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits above the 200-day EMA, currently at $1.22191. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing the 200-day EMA, delivering bearish signals.
A move through the 100-day EMA ($1.22976) would support a breakout from the 50-day EMA ($1.23297) and R1 ($1.2343) to target R2 ($1.2461). However, a fall through the 200-day EMA ($1.22191) would bring S1 $1.2164 into play. A move through the 50-day EMA would send a bullish signal.
The US Session
It is a busy day on the US economic calendar. The US Jobs Report for January will be the key driver today. Following better-than-expected jobless claims figures from Thursday, a marked increase in nonfarm payrolls and better-than-expected wage growth would drive dollar demand.
Economists forecast average hourly earnings to rise by 4.3% year-over-year versus 4.6% in December and for nonfarm payrolls to increase by 185k.
Later in the session, the ISM Non-Manufacturing PMI and sub-components will also influence. Beyond the headline figure, investors need to consider employment, new orders, and price sub-components.