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GBP to USD Forecasts: Bulls Eye $1.2650 on Weak US Jobs Report

By:
Bob Mason
Published: May 5, 2023, 04:42 GMT+00:00

It is a relatively quiet day for the GBP to USD. However, the US Jobs Report could tilt monetary policy divergence in favor of the BoE.

GBP to USD - Tech Analysis - FX Empire

In this article:

It is a relatively quiet day ahead for the GBP/USD. UK construction PMI numbers for April will be in focus this morning. However, barring dire numbers, we don’t expect the PMI numbers to impact the GBP/USD.

Market risk sentiment will continue to provide direction ahead of the US session.

Investors should monitor Bank of England chatter, with the economic calendar on the light side. However, no Monetary Policy Committee members are on the calendar to speak today, leaving commentary will the media to influence.

With the markets betting on the end of the Fed monetary policy tightening cycle, monetary policy divergence favors the Pound. Elevated inflation and a resilient UK economy leave the Bank of England on course for a May 11 interest rate hike and possibly another move before hitting the pause button.

GBP to USD Price Action

This morning, the GBP/USD was up 0.30% to $1.26104. A mixed start to the day saw the GBP/USD fall to an early low of $1.25648 before rising to a high of $1.26142. The GBP/USD broke through the First Major Resistance Level (R1) at $1.2599.

GBP to USD on the move.
GBPUSD 050523 Daily Chart

Technical Indicators

Resistance & Support Levels

R1 – $ 1.2599 S1 – $ 1.2547
R2 – $ 1.2625 S2 – $ 1.2520
R3 – $ 1.2678 S3 – $ 1.2468

The Pound needs to avoid a fall through R1 and the $1.2573 pivot to target the Second Major Resistance Level (R2) at $1.2625. A move through the morning high of $1.26142 would signal an extended breakout session. However, the Pound would need the US Jobs report to support a breakout session.

In the event of an extended rally, the GBP/USD would likely test resistance at $1.2650. The Third Major Resistance Level sits at $1.2678.

A fall through R1 and the pivot would bring the First Major Support Level (S1) at $1.2547 into play. However, barring a Fed-fueled sell-off, the GBP/USD should avoid sub-$1.25. The Second Major Support Level (S2) at $1.2520 should limit the downside. The Third Major Support Level (S3) sits at $1.2468.

GBP to USD resistance levels in play above the pivot.
GBPUSD 050523 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The GBP/USD sits above the 50-day EMA, currently at $1.25111. 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 ($1.25111) would support a breakout from R2 ($1.2625) to give the bulls a run at $1.2650. However, a fall through R1 ($1.2547) would bring S1 ($1.2547) into view. A fall through the 50-day EMA ($1.25111) would send a bearish signal.

EMAs are bullish.
GBPUSD 050523 4-Hourly Chart

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar. The US Jobs Report will be the main report of the day.

A pickup in wage growth and a jump in nonfarm payrolls would fuel bets on a June interest rate hike. However, a weak nonfarm payroll figure would weigh, with recessionary jitters gripping the markets.

Beyond the economic calendar, the banking sector, the US debt ceiling, and corporate earnings need consideration.

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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