GBP to USD Forecasts: Bulls Eye $1.21 on Fed Forward Guidance

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators to draw interest. Through the early part of the day, the lack of stats will leave the GBP/USD in the hands of market risk sentiment.

Going into the European session, UK politics and Brexit remain focal points. UK Prime Minister Rishi Sunak made it through the first 100 days this week. The cabinet reshuffle needs to continue to deliver political stability to restore confidence and support the Pound.

According to the latest YouGov Voting Intention poll from January 31 to February 1, Labor leads with 48% against 24% for the Tories.

With no economic indicators to consider, investors should monitor Monetary Policy Committee Member speeches. However, no MPC members are on the calendar, leaving chatter with the media to influence.

GBP/USD Price Action

At the time of writing, the Pound was up 0.02% to $1.20496. A mixed start to the day saw the GBP/USD fall to an early low of $1.20300 before rising to a high of $1.20514.

Technical Indicators

The Pound needs to avoid a fall through the $1.2034 pivot to target the First Major Resistance Level (R1) at $1.2108. A return to $1.21 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 $1.2169. The Third Major Resistance Level sits at $1.2303.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1973 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.1950 and the second Major Support Level (S2) at $1.1900.

The Third Major Support Level (S3) sits at $1.1766.

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 $1.21905. After Tuesday’s bearish cross, the 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA narrowing on the 200-day EMA, delivering bearish signals.

A move through R1 ($1.2108) would give the bulls a run at R2 ($1.2169) and the 50-day EMA ($1.21905). However, a further pullback of the 50-day EMA from the 200-day EMA would support a fall through S1 ($1.1973) to bring sub-$1.1950 support levels into view.

The US Session

It is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider this afternoon. However, FOMC members Williams, Waller, and Barr will speak today. Views on inflation, labor market conditions, and monetary policy would provide direction.