GBP to USD Forecasts: Bulls to Target $1.25 on Debt Vote

It is a quiet Wednesday session for the GBP/USD. There are no UK economic indicators to influence the GBP to USD.

The lack of UK economic indicators will leave the GBP/USD in the hands of market risk sentiment. Investor sentiment toward the economic outlook and US debt ceiling-related news will be the key drivers ahead of the US session.

However, private sector PMIs from China set the tone this morning. NBS Manufacturing and Non-Manufacturing PMI figures for May gave investors a better view of the macroeconomic environment midway through the second quarter.

The NBS Manufacturing PMI declined from 49.2 to 48.8, with the Non-Manufacturing PMI falling from 56.4 to 54.5. Economists forecast the NBS Manufacturing PMI to rise from 49.2 to 49.4 and the Non-Manufacturing PMI to fall from 56.4 to 55.0.

The NBS numbers are a precursor to the Caixin Manufacturing PMI numbers that will have more impact on riskier assets.

While there are no UK economic indicators to influence, investors should monitor Bank of England chatter. Monetary Policy Committee member Catherine Mann is on the calendar to speak today, though investors should track commentary with the media.

GBP to USD Price Action

This morning, the GBP/USD was down 0.17% to $1.23916. A mixed start to the day saw the GBP/USD rise to an early high of $1.24261 before falling to a low of $1.23906.

Technical Indicators

Resistance & Support Levels

The Pound needs to move through the $1.2395 pivot to target the First Major Resistance Level (R1) at $1.2464. A move through the Tuesday high of $1.24466 would signal an extended breakout session. However, the Pound would need US debt ceiling-related news and central bank 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 $1.2515. The Third Major Resistance Level sits at $1.2635.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2344 in play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.23 and the Second Major Support Level (S2) at $1.2275. The Third Major Support Level (S3) sits at $1.2156.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The GBP/USD sits below the 50-day EMA, currently at $1.23969. The 50-day EMA eased back from the 200-day EMA, with the 100-day EMA pulling back from the 200-day EMA, delivering bearish signals.

A move through the EMAs would support a breakout from R1 ($1.2464) to give the bulls a run at R2 ($1.2515). However, failure to move through the 50-day EMA ($1.23969) would leave S1 ($1.2344) in view. A move through the 50-day EMA would send a bullish signal.

The US Session

Looking ahead to the US session, it is a relatively busy day on the US economic calendar.

JOLTs job openings will be the main report as investors prepare for Friday’s US Jobs Report. While the headline figure will influence, investors should consider quit rates. A pickup in quit rates would signal employee confidence in US labor market conditions.

However, FOMC members will also need consideration. FOMC members Harker and Bowman are on the calendar to speak today.

While the numbers and Fed commentary will influence, investors should monitor US debt ceiling-related news. US lawmakers could vote on the deal later today.