GBP to USD Forecasts: Bulls Target $1.24 on US Non-Manufacturing PMI

It is a quiet day for the GBP/USD. Finalized services and composite PMI numbers for November will be in focus. However, barring a sharp revision from prelims, the finalized figures should have a muted impact on the Pound.

Doom and gloom views on the economy failed to sink the GBP/USD this morning. Risk-on sentiment driven by further news of China easing COVID-19 lockdown restrictions delivered early support.

The Asian markets also responded to Friday’s US Jobs Report, which gave little reason to think the Fed would deliver another 75-basis point rate hike this month, despite the pick-up in wage growth.

However, the outlooks towards the respective economies are poles apart. While the ISM Manufacturing PMI showed a US manufacturing sector contraction in November, economists forecast the ISM Non-Manufacturing PMI to fall from 54.4 to 53.1 versus a UK services PMI forecast of 48.8.

This morning, the CBI talked about the UK embarking on a lengthy recession. According to the Financial Times,

“The CBI warned that gross domestic product would fall by 0.4% in 2023, a downgrade from its previous forecast of 1 percent growth set in June.”

According to the report, the CBI expects business investment to sit 8% lower than pre-COVID levels by the end of 2024.

However, the GBP/USD ignored the gloomy outlook, which was nothing new for the markets to consider.

With economic indicators on the lighter side, BoE chatter could move the dial. There are no Bank of England Monetary Policy Member speeches for the markets to consider. The lack of commentary will leave member chatter with the media to influence ahead of the US session.

GBP/USD Price Action

At the time of writing, the Pound was up 0.38% to 1.23344. A mixed start to the day saw the GBP/USD fall to an early low of $1.22700 before rising to a high of $1.23442.

Technical Indicators

The Pound needs to avoid the $1.2240 pivot to retarget the First Major Resistance Level (R1) at $1.2347. Risk-on sentiment and a weak US ISM Non-Manufacturing PMI would support a bullish session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2406. The Third Major Resistance Level (R3) sits at $1.2572.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2181 into play. However, barring a sharp pick-up in US service sector activity, the GBP/USD should avoid sub-$1.21 and the Second Major Support Level (S2) at $1.2074.

The Third Major Support Level (S3) sits at $1.1908.

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 $1.20830. 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 ($1.2181) and the 50-day EMA ($1.20830) would support a move through R1 ($1.2347) to target R2 ($1.2406). However, a GBP/USD fall through S1 (1.2181) would bring the 50-day EMA ($1.20830) and S2 ($1.2074) into view. The 200-day EMA sits at $1.17704.

The US Session

It is a busy day ahead, with US factory orders and service sector PMI numbers in the spotlight. Following the contraction in the US manufacturing sector, according to the ISM PMI on Thursday, today’s ISM Non-Manufacturing PMI will draw the most interest.

We expect the headline number and the sub-components, including inflation, employment, and new orders to influence. A sharp fall in the headline number would raise fears of a US economic recession.

However, no FOMC members are speaking today, with the Fed entering the blackout period on Sunday.