GBP to USD Forecasts: Bulls Target $1.2650 on Hawkish BoE Bets

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators for investors to consider, with the UK markets closed for Labor Day.

The lack of stats will leave the GBP/USD in the hands of market risk sentiment ahead of the US session. Disappointing private sector PMI numbers from China and First Republic Bank (FRC) updates delivered a mixed start to the Monday session.

On Sunday, private sector PMI numbers from China drew interest. The NBS Manufacturing PMI fell from 51.9 to 49.2, with the Non-Manufacturing PMI declining from 58.2 to 56.4. The contraction in the manufacturing sector was significant, with the post-COVID recovery running out of steam.

However, news of progress toward saving First Republic Bank provided support this morning.

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

The BoE has yet to make a dent in inflation, suggesting the Bank may need to continue to push rates higher beyond May to bring inflation under control.

With the Fed and the ECB in action this week and the BoE delivering next week, hawkish BoE bets and a cautious Fed would support a breakout week for the Pound.

GBP to USD Price Action

This morning, the GBP/USD was up 0.02% to $1.25677. A mixed start to the day saw the GBP/USD fall to an early low of $1.25507 before rising to a high of $1.25688.

Technical Indicators

Resistance & Support Levels

The Pound needs to avoid the $1.2532 pivot to target the First Major Resistance Level (R1) at $1.2617. A move through the Friday high of $1.25837 would signal an extended breakout session. However, the Pound would need First Republic Bank and the US stats 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 $1.2669. The Third Major Resistance Level sits at $1.2806.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2480 into play. However, barring a US data-off-fueled sell-off, the GBP/USD should avoid sub-$1.2450 and the Second Major Support Level (S2) at $1.2394. 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 $1.24696. 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 ($1.2479) and the 50-day EMA ($1.24696) would support a breakout from R1 ($1.2617) to give the bulls a run at R2 ($1.2669). However, a fall through S1 ($1.2479) and the 50-day EMA ($1.24696) would bring the 100-day EMA ($1.2380) 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 busy day on the US economic calendar. The ISM Manufacturing PMI for April will draw interest. While the headline figure will influence, we expect the prices and employment sub-components to also move the dial.

Away from the economic calendar, US corporate earnings and updates on First Republic Bank (FRC) will also influence market risk sentiment.

On Sunday, news hit the wires of US regulators attempting to avert a banking crisis by selling the beleaguered bank to a large US bank. JP Morgan Chase (JPM) was reportedly the front-runner. Overnight, news of PNC Financial Services (PNC), JPMorgan, Citizens Financial Group (CFG), and other banks submitting bids in a First Republic Bank auction eased bets on another US bank collapse.