GBP to USD Forecasts: Bulls Eye $1.31 on Policy Divergence Bets

Highlights

• It is a quiet start to the day for the GBP to USD, with no UK economic indicators to distract investors from the Fed.
• However, the Fed interest rate decision and the Fed Chair Powell press conference will move the dial.
• Near-term indicators are bearish, with the bears eying a return to sub-$1.2750.

On Tuesday, the GBP to USD gained 0.62% to wrap up the day at $1.29015. Market reaction to the Politburo pledges, IMF UK growth forecasts, and hawkish BoE bets supported a bullish session.

However, it is a quiet Wednesday session on the UK economic calendar. There are no economic indicators from the UK to distract investors from the Fed interest rate decision and the Fed Chair Powell press conference.

No Monetary Policy Committee members are on the calendar to speak today, leaving comments to the media to influence.

The US Session

US housing sector data should have a muted impact on the EUR/USD, with the Fed interest rate decision and press conference in focus.

A 25-basis point interest rate hike would leave the FOMC Statement and press conference to move the dial. With the softer US CPI Report wiping out bets on a September rate hike, a hawkish 25-basis point interest rate hike would catch the markets by surprise.

GBP to USD Price Action

Daily Chart

The Daily Chart showed the GBP to USD sat above the $1.2862 – $1.2785 support band after ending a seven-day losing streak on Tuesday. Looking at the EMAs, the GBP to USD remained above the 50-day ($1.27308) and 200-day ($1.24186) EMAs, signaling bullish momentum over the near and long term.

Notably, the 50-day EMA continued to pull away from the 200-day EMA, affirming the near-term bullish trend.

Looking at the 14-Daily RSI, the 54.36 reading sent bullish price signals, aligning with the 50-day and 200-day EMAs. A GBP to USD return to $1.2950 would give the bulls a run at $1.30. However, a fall through the upper level of the $1.2862 – $1.2785 support band would bring sub-$1.28 and the 50-day EMA ($1.27308) into view.

Price action today hinges on the Fed interest rate decision and press conference.

4-Hourly Chart

Looking at the 4-Hourly Chart, the GBP to USD holds above the $1.2862 – $1.2785 support band. However, the GBP to USD remains below the 50-day EMA ($1.29010) while holding above the 200-day EMA ($1.27933), sending bearish near-term but bullish longer-term signals.

Significantly, the 50-day EMA narrowed on the 200-day EMA, signaling a fall through the $1.2862 – $1.2785 support band and the 200-day EMA ($1.27933).

However, a GBP to USD breakout from the 50-day EMA ($1.29010) would give the bulls a run at $1.31.

The 14-4H RSI reading of 51.22 sent bullish signals, with buying pressure outweighing selling pressure. Significantly, the RSI signals a breakout from the 50-day EMA to bring $1.31 into view.

Price action today hinges on the Fed interest rate decision and press conference.