GBP to USD Forecasts: Bulls Eye $1.2350 on UK Inflation and the Fed

Bob Mason
Updated: Mar 22, 2023, 06:50 UTC

It is a busy day for the GBP to USD. The UK CPI Report will draw plenty of interest ahead of a Brexit vote in Parliament and the Fed interest rate decision.

GBP to USD technical analysis - FX Empire

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It is a busy day ahead for the GBP/USD. Later this morning, UK inflation figures for February will draw plenty of interest.

With the Bank of England delivering its March monetary policy decision tomorrow, the UK CPI Report could materially impact sentiment toward monetary policy and the Pound.

Away from the economic calendar, investors also need to consider the latest on Brexit. Today, the UK Parliament will debate a motion to approve the draft Windsor Framework Regulations 2023. The markets expect British Prime Minister Rishi Sunak to win with the support of the Labour Party.

Investors should track Bank of England member commentary with inflation and Brexit in the spotlight. However, there are no Monetary Policy Committee Member speeches for investors to monitor, leaving chatter with the media to influence.

GBP/USD Price Action

This morning, the GBP/USD was up 0.13% to $1.22316. A mixed start to the day saw the GBP/USD fall to an early low of $1.22059 before rising to a high of $1.22334.

GBP to USD makes an early move.
GBPUSD 220323 Daily Chart

Technical Indicators

The Pound needs to avoid the $1.2226 pivot to target the First Major Resistance Level (R1) at $1.2273 and the Tuesday high of $1.22827. A return to $1.2250 would signal an extended breakout session. However, the Pound would need market risk sentiment and Brexit to support a pre-Fed breakout session.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2330 and resistance at $1.2350. The Third Major Resistance Level sits at $1.2434.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2169 into play. However, barring a Fed-fueled sell-off, the GBP/USD should avoid sub-$1.21. The second Major Support Level (S2) at $1.2122 should limit the downside. The Third Major Support Level (S3) sits at $1.2018.

GBP to USD resistance levels in play above the pivot.
GBPUSD 220323 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 $1.21418. The 50-day EMA widened from the 200-day EMA, with the 100-day EMA pulling away from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2169) and the 50-day EMA ($1.21418) would support a breakout from R1 ($1.2273) to target R2 ($1.2330) and $1.2350. However, a fall through S1 ($1.2169) would give the bears a run at the 50-day EMA ($1.21418) and S2 ($1.2122). A fall through the 50-day EMA ($1.21418) would send a bearish signal.

EMAs are bullish.
GBPUSD 220323 4-Hourly Chart

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. There are no US economic indicators for investors to consider. The lack of economic indicators will leave the market focused on the Federal Reserve.

The banking crisis took a 50-basis point Fed rate hike off the table. However, there is uncertainty over whether the Fed will pause post-March or push beyond the previously projected 5.1% peak.

There are no FOMC member speeches to consider. The Fed is in a blackout period, leaving investors to respond to the Fed policy decision, FOMC projections, and Fed Chair Powell.

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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