GBP to USD Forecasts: Bulls to Target $1.2265 on Fed Sentiment

It is a quiet start to the week for the GBP/USD. There are no UK economic indicators early in the session for the markets to consider, leaving the Pound in the hands of market risk sentiment.

Later in the day, UK CBI Industrial Trend Orders will draw interest. However, while we can expect GBP/USD sensitivity to the numbers, the December figure is unlikely to influence the Bank of England and its monetary policy goals.

Market fears of a global economic recession will likely remain a common theme along with sentiment towards Fed monetary policy. Recent US economic indicators have brought into question the Fed’s hawkish interest rate projections.

There are no Bank of England Monetary Policy Committee member speeches to distract investors today. Investors will need to monitor MPC member chatter with the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.40% to $1.21893. A mixed start to the day saw the GBP/USD fall to an early low of $1.21445 before rising to a high of $1.21917.

Technical Indicators

The Pound needs to avoid the $1.2161 pivot to target the First Major Resistance Level (R1) at $1.2203 and the Friday high of $1.2265. A return to $1.22 would signal a bullish session. However, market risk sentiment will need to improve to support a breakout session.

In the case of an extended rally, the GBP/USD would likely test the Second Major Resistance Level at $1.2265. The Third Major Resistance Level (R3) sits at $1.2368.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2099 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.20. The Second Major Support Level (S2) at $1.2057 should limit the downside.

The Third Major Support Level (S3) sits at $1.1954.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 100-day EMA, currently at $1.21620. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 100-day EMA ($1.21620) would support a breakout from R1 ($1.2203) to bring the 50-day EMA ($1.22456) and R2 ($1.2265) into play. However, failure to move through the 100-day EMA ($1.21620) would leave S1 ($1.2099) in view. The 200-day EMA sits at $1.19842.

The US Session

It is a quiet day ahead for the dollar. House price figures for December will be in focus. With recession fears resurfacing and mortgage rates elevated, a fall in the NAHB Housing Market Index could weigh on riskier assets.

Falling house prices would put the sector under more pressure, a dampener for consumer confidence, which could further fuel fears of a recession.

Following last week’s hawkish Fed interest rate hike, investors will need to monitor FOMC member chatter. Last week, US economic indicators and the FOMC interest rate projections delivered uncertainty.