GBP to USD Forecasts: Bulls Face Risk of Sub-$1.24 on Recession Risk

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

The lack of stats will leave the Pound in the hands of market risk sentiment and Monetary Policy Committee member chatter.

Last week, UK inflation numbers raised the prospects of a more hawkish Bank of England interest rate hike. On Friday, Bank of England Deputy Governor Dave Ramsden acknowledged that inflation remained elevated, saying,

“When I look at where inflation is and where it needs to go, I’m more focused on making sure that (we) stay the course in terms of the monetary policy decisions needed to get inflation back to target.”

Ramsden added,

“(High inflation) is a bigger risk than over-tightening.”

The UK annual inflation rate slipped from 10.4% to 10.1% in March, putting pressure on the BoE to take a more hawkish monetary policy stance to tame inflation. However, a more hawkish policy outlook could put the UK at risk of an economic downturn.

In March, Chancellor Jeremy Hunt stated that inflation would tumble and that the UK would avoid a technical recession. Sticky inflation would test the theory.

With no stats to consider, investors should monitor the Bank of England commentary. However, no MPC members are on the calendar to speak today, leaving investors to monitor chatter with the media.

GBP to USD Price Action

This morning, the GBP/USD was down 0.03% to $1.24398. A mixed start to the day saw the GBP/USD rise to an early high of $1.24516 before falling to a low of $1.24352.

Technical Indicators

Resistance & Support Levels

The Pound needs to avoid the $1.2419 pivot to target the First Major Resistance Level (R1) at $1.2471. A move through the morning high of $1.24516 would signal an extended breakout session. However, the Pound would need risk-on sentiment and hawkish BoE 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 $1.2500 and resistance at $1.2550. The Third Major Resistance Level sits at $1.2581.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2390 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.2350 and the Second Major Support Level (S2) at $1.2338. The Third Major Support Level (S3) sits at $1.2257.

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 $1.24314. 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 the 50-day EMA ($1.24314) would support a breakout from R1 ($1.2471) to give the bulls a run at R2 ($1.2500) and $1.2550. However, a fall through the 50-day EMA ($1.24314) would bring the 100-day EMA ($1.24029) and S1 ($1.2390) into view. 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 to consider.

After the better-than-expected PMI numbers, investors are expecting a more hawkish Fed outlook. However, there are no FOMC member speeches to consider. The Fed entered the blackout period on Saturday.