GBP to USD Forecasts: Bears Target Sub-$1.19 on Fed Policy Outlook

It is a quiet start to the week for the GBP/USD. There are no UK economic indicators for investors to consider through the European session. The lack of stats will leave the GBP/USD in the hands of market risk sentiment early in the day.

Brexit updates will need consideration going into the European session. An agreement on the Ireland Protocol would be GBP/USD positive.

While there are no stats for investors to digest, Monetary Policy Committee member speeches will draw interest. Following the US inflation numbers on Friday, the GBP/USD would need hawkish MPC member commentary to deliver price support.

MPC member Ben Broadbent is due to speak today. Following better-than-expected prelim service PMI numbers for February, hawkish chatter would deliver a GBP/USD boost. However, investors should also monitor commentary with the media.

GBP/USD Price Action

At the time of writing, the GBP/USD was up 0.06% to $1.19463. A mixed start to the day saw the GBP/USD rise to an early high of $1.19640 before falling to a low of $1.19375.

Technical Indicators

The Pound needs to move through the $1.1969 pivot to target the First Major Resistance Level (R1) at $1.2011 and the Friday high of $1.20417. A return to $1.2000 would signal an extended breakout session. However, the Pound would need hawkish MPC member chatter and Brexit news to support a breakout session.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2084. The Third Major Resistance Level sits at $1.2198.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.1897 in play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.1800. The second Major Support Level (S2) at $1.1855 should limit the downside. The Third Major Support Level (S3) sits at $1.1740.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.20403. The 50-day EMA slid back from the 100-day EMA, with the 100-day EMA pulling back from the 200-day EMA. The signals were bearish.

A move through R1 ($1.2011) would give the bull a run at the 50-day EMA ($1.20403). A breakout from the 50-day EMA ($1.20403) would give the bulls a run at the 100-day EMA ($1.20837) and R2 ($1.2084). However, failure to move through the 50-day EMA ($1.20403) would leave S1 ($1.1897) in 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. Core durable goods orders for January will be in the spotlight. Following the latest round of US stats, better-than-expected core durable goods orders would further fuel expectations of a more aggressive Fed interest rate trajectory to bring inflation under control.

Pending home sales figures for January will also draw interest. However, US mortgage rates fell from October to January, which drove demand. In contrast, US mortgage rates have shot up in recent weeks, fueled by the shift in sentiment toward Fed monetary policy that has weighed on mortgage applications.

Following the latest Core PCE Price Index numbers, investors should also monitor FOMC member chatter.