GBP to USD Forecasts: Bears to Retarget Sub-$1.2050 on US Stats

It is another quiet day ahead for the GBP/USD. There are no UK economic indicators for the markets to consider. A lack of stats through the first half of the week leaves the GBP/USD in the hands of market sentiment toward Fed monetary policy and recession fears.

However, on Tuesday, the Bank of Japan moved the markets after announcing a change in its target range for 10-year yields from 25 basis points to 50 basis points. In response, the GBP/USD fell to a low of $1.20848 before recovering on dollar weakness and a pickup in risk appetite through the US session.

Following Tuesday’s moves, it could be another choppy day ahead, with the markets needing to wait until the US session for economic indicators to provide direction.

There are no Bank of England Monetary Policy Committee member speeches to distract investors today. Investors will need to monitor MPC member chatter with the media. In a quiet run-up to the holidays, investors will need to wait until tomorrow for UK GDP numbers that could move the dial.

GBP/USD Price Action

At the time of writing, the Pound was down 0.09% to $1.21723.

Technical Indicators

The Pound needs to avoid the $1.2164 pivot to target the First Major Resistance Level (R1) at $1.2243. A move through the Tuesday high of $1.22237 would signal a bullish session. However, market risk sentiment will need to improve to support a breakout session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2303. The Third Major Resistance Level (R3) sits at $1.2442.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2104 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.20. The Second Major Support Level (S2) at $1.2025 should limit the downside.

The Third Major Support Level (S3) sits at $1.1886.

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 $1.22120. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($1.22120) would support a breakout from R1 ($1.2243) to bring R2 ($1.2303) into play. However, failure to move through the 50-day EMA ($1.22120) and a fall through the 100-day EMA ($1.21623) would bring S1 ($1.2104) into view. The 200-day EMA sits at $1.20060.

The US Session

House sector data for November and consumer confidence figures for December will be in focus in the US session.

While the consumer confidence figure will likely have the most influence, housing sector numbers will also garner interest.

Mortgage rates and recession fears have adversely affected the housing sector this year. Weak building permit and housing start numbers on Tuesday reflected market conditions. Existing home sales will likely provide further evidence of deteriorating housing market conditions later today.

However, with the Fed a market focal point, investors will need to monitor FOMC member commentary.