GBP to USD Forecasts: Bulls Eye $1.2435 to Bring $1.25 into View

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators for investors to digest later this morning.

The lack of stats will leave market sentiment toward BoE and Fed monetary policy to provide direction. Recent FOMC member and Bank of England commentary have tilted monetary policy divergence toward the Greenback.

However, better-than-expected UK economic indicators reflect a resilient UK economy facing unrelenting inflationary pressure. The GBP/USD would need a shift in the Bank of England’s forward guidance to support a breakout from the current ranges. Dovish MPC member chatter has plagued the GBP/USD.

Last Tuesday. MPC member Silvana Tenreyro talked about cutting rates earlier and faster. Tenreyro was also in focus on Wednesday, discussing the impact of a persistent rise in bank funding costs on the UK economy.

GBP/USD Price Action

This morning, the GBP/USD was up 0.21% to $1.24078. A mixed start to the day saw the GBP/USD fall to an early low of $1.23783 before rising to a high of $1.24133.

Bullish UK economic data delivered early support. In March, the BRC Retail Sales Monitor increased by 4.9% year-over-year versus a forecasted 4.2% rise. The BRC Retail Sales Monitor rose by 4.9% in February.

Technical Indicators

The Pound needs to avoid the $1.2390 pivot to target the First Major Resistance Level (R1) at $1.2435 and the Monday high of $1.24426. A move through the morning high of $1.24133 would signal an extended breakout session. However, the Pound would need dovish Fed chatter 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 $1.2488 and resistance at $1.25. The Third Major Resistance Level sits at $1.2586.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2337 into play. However, barring a Fed-fueled sell-off, the GBP/USD should avoid sub-$1.23 and the Second Major Support Level (S2) at $1.2291. Third Major Support Level (S3) sits at $1.2193.

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 $1.23955. 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 the 50-day EMA ($1.23955) would support a breakout from R1 ($1.2435) to target R2 ($1.2488) and $1.25. However, a fall through the 50-day EMA ($1.23955) would give the bears a run at S1 ($1.2337) and the 100-day EMA ($1.23335). A fall through the 50-day EMA would send a bearish signal.

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 before tomorrow’s US CPI Report for March.

The lack of stats will leave hawkish Fed bets and FOMC member chatter to influence the afternoon session.