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GBP to USD Forecasts: A Return to $1.24 US Data Dependent

By:
Bob Mason
Updated: Jan 19, 2023, 07:26 UTC

It is a quiet day ahead for the GBP to USD, with no UK stat to consider. However, central bank chatter, Brexit, and US economic indicators will influence.

GBP/USD - technical analysis - FX Empire.

In this article:

It is a quiet day ahead for the GBP/USD. Following the UK employment and inflation figures on Tuesday and Wednesday, there are no UK stats for investors to consider.

However, the Bank of England Credit Conditions Survey will likely draw interest. The quarterly survey gives the BoE a better understanding of trends and developments in credit conditions.

With no UK economic indicators to influence, investors should also consider Monetary Policy Committee member commentary. With no members speaking today, chatter with the media could move the dial. Bank of England Governor Bailey talked about softer inflation this week but did not hint at slowing the pace of interest rate hikes.

On the geopolitical front, Brexit remains another curveball for investors, with the Northern Ireland Protocol and the December auto-expiry of thousands of EU-era laws causing political friction.

GBP/USD Price Action

At the time of writing, the Pound was up 0.02% to $1.23455. A mixed start to the day saw the GBP/USD fall to an early low of $1.23373 before finding support.

GBP to USD finds early support.
GBPUSD 190123 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.2344 pivot to target the First Major Resistance Level (R1) at $1.2434 and the Wednesday high of $1.24357. A return to $1.24 would signal a bullish session. However, the Pound would need risk-on sentiment to support another breakout ahead of the US session.

In the event of an extended rally, the GBP to USD would likely test resistance at $1.25 but fall short of the Second Major Resistance Level (R2) at $1.2526. The Third Major Resistance Level sits at $1.2708.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2252 into play. However, barring a data-fueled sell-off, the GBP/USD should avoid sub-$1.22 and the second Major Support Level (S2) at $1.2162.

The Third Major Support Level (S3) sits at $1.1980.

GBP to USD resistance levels in play above the pivot.
GBPUSD 190123 1 Hourly Chart

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 $1.22091. The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2252) and the 50-day EMA ($1.22091) would support a breakout from R1 ($1.2434) to target $1.25. However, a fall through S1 ($1.2252) and the 50-day EMA ($1.22091) would bring S2 ($1.2162) and the 100-day EMA ($1.21604) into view. A fall through the 50-day EMA would send a bearish signal.

EMAs are bearish.
GBPUSD 190123 4-Hourly Chart

The US Session

It is a busy day ahead on the US economic calendar, with housing sector data, jobless claims, and the Philly Fed Manufacturing Index in the spotlight. Barring dire housing sector numbers, the Philly Fed Manufacturing Index and jobless claims will likely have more influence.

A sharp rise in the Philly Fed Manufacturing Index and a fall in initial jobless claims would pressure the GBP/USD.

Beyond the economic indicators, investors should also monitor FOMC member commentary. Members would need to talk about a 50-basis point interest rate hike or a pause on lifting rates to move the dial.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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