GBP to USD Forecasts: Bulls Eye $1.2450 on a Weak US Jobs Report

It is a quiet day for the GBP/USD. There are no UK economic indicators for the markets to consider today.

Following GBP/USD’s return to $1.23 on Thursday for the first time since June, the focus remains on the Fed.

While hawkish bets are placing the Pound at $1.25 levels going into 2023, plenty of uncertainty remains. The UK economic outlook remains bleak, with uncertainty building over the Bank of England’s policy moves.

Industry leaders and central bankers are beginning to view the October 40-year high inflation of 11.1% as the peak. With Fed Chair Powell talking about taking the foot off the gas, expectations are for the BoE to follow suit, which could see the Pound struggle to break out from $1.25 levels should economic conditions deteriorate further.

While central banks remain the focal point, there are no Bank of England Monetary Policy Member speeches for the markets to consider. The lack of commentary will leave chatter with the media to influence ahead of the US session.

GBP/USD Price Action

At the time of writing, the Pound was down 0.21% to 1.22282. A mixed start to the day saw the GBP/USD rise to an early high of $1.22782 before falling to a low of $1.22268.

Technical Indicators

The Pound needs to avoid the $1.2204 pivot to target the First Major Resistance Level (R1) at $1.2361. Risk-on sentiment and a weak US Jobs Report would support a bullish session.

In the case of an extended rally, the GBP/USD would likely test resistance at $1.24 and eye the Second Major Resistance Level at $1.2467. The Third Major Resistance Level (R3) sits at $1.2731.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2098 into play. However, barring a sharp pick-up in US wage growth and a surge in nonfarm payrolls, the GBP/USD should avoid sub-$1.20 and the Second Major Support Level (S2) at $1.1941.

The Third Major Support Level (S3) sits at $1.1678.

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 $1.20291. The 50-day EMA pulled away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2098) and the 50-day EMA ($1.20291) would support a move through R1 ($1.2361) to target R2 ($1.2467). However, a GBP/USD fall through S1 (1.2098) and the 50-day EMA ($1.20291) would give the bears a run at S2 ($1.1941). The 200-day EMA sits at $1.17389.

The US Session

It is a big day ahead, with the US Jobs Report in the spotlight. Following Fed Chair Powell’s talk of a Fed pivot and softer inflation numbers, weaker wage growth and a modest increase in nonfarm payrolls could bring a 25-basis point rate hike onto the table for later this month.

However, a pick-up in wage growth and a surge in nonfarm payrolls may hand the baton back to the Fed Hawks.

With the markets focused on today’s stats and the implications for the Fed, FOMC member chatter will also need monitoring. Chicago Fed President Evans will speak after the Jobs Report.