GBP to USD Forecasts: Bulls to Target $1.25 on BoE Minutes

It is a big day ahead for the GBP/USD. While there are no UK economic indicators for investors to consider, the Bank of England will deliver its first monetary policy decision of the year.

The markets expect a 50-basis point interest rate hike to take the interest rate to 4.00%. A 50-basis point rate hike would shift the focus to the BoE MPC Meeting Minutes. BoE sentiment toward inflation and the economic outlook will be areas of focus, along with monetary policy forward guidance.

A hawkish rate hike could reignite fears of a lengthy UK economic recession that would weigh on the Pound.

While the monetary policy decision will be the main event, investors should consider Monetary Policy Committee Member speeches. However, no members are due to speak today, leaving investors to monitor chatter with the media.

GBP/USD Price Action

At the time of writing, the Pound was up 0.13% to $1.23890. A bullish start to the day saw the GBP/USD rise from an early low of $1.23703 to a high of $1.24004.

Technical Indicators

The Pound needs to avoid a fall through the $1.2346 pivot to target the First Major Resistance Level (R1) at $1.2421. A return to $1.24 would signal an extended breakout session. However, the Pound would need a hawkish BoE to support a breakout session.

In the event of an extended rally, the GBP to USD would likely test the Second Major Resistance Level (R2) at $1.2469 and resistance at $1.25. The Third Major Resistance Level sits at $1.2591.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2298 into play. However, barring a BoE-fueled sell-off, the GBP/USD should avoid sub-$1.2250 and the second Major Support Level (S2) at $1.2224.

The Third Major Support Level (S3) sits at $1.2101.

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 $1.23428. 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 ($1.23428) would support a breakout from R1 ($1.2421) to target R2 ($1.2469) and $1.25. However, a fall through the 50-day EMA ($1.23428) would bring the 100-day EMA ($1.22994) and S1 $1.2298 into view. A fall through the 50-day EMA would send a bearish signal.

The US Session

It is a busy day on the US economic calendar. US jobless claims, factory orders, core durable goods orders, and nonfarm productivity and unit labor cost numbers will be in focus.

We expect the jobless claims and unit labor cost numbers to have more influence. However, a sharp fall in factory and core durable goods orders could spook investors.