GBP to USD Forecasts: Bulls to Target $1.2550 on US Inflation

It is a quiet day ahead for the GBP/USD. There are no UK economic indicators for investors to consider. The lack of stats will leave the GBP/USD in the hands of market risk sentiment ahead of the US session.

While there are no stats to influence, inflation, the economic outlook, and central bank monetary policy remain the focal points. Weaker-than-expected US GDP numbers for Q1 failed to reduce the bets on a 25-basis point Fed interest rate hike in May.

The Bank of England also remains on course to deliver a 25-basis point interest rate hike. However, neither the Fed nor the BoE looks willing to make more hawkish moves despite sticky inflation, leaving resistance at $1.25 to peg GBP/USD from a run at $1.26.

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.

In March, MPC members Silvana Tenreyro and Swati Dhingra voted to maintain the Bank Rate at 4%. A shift in forward guidance from Tenreyro or Dhingra would change the narrative.

GBP to USD Price Action

This morning, the GBP/USD was down 0.08% to $1.24856. A mixed start to the day saw the GBP/USD fall to an early low of $1.24789 before rising to a high of $1.25039.

Technical Indicators

Resistance & Support Levels

The Pound needs to avoid the $1.2477 pivot to target the First Major Resistance Level (R1) at $1.2518. A move through the morning high of $1.25039 would signal an extended breakout session. However, the Pound would need risk-on sentiment and hawkish BoE chatter to support a pre-US session breakout.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2541 and resistance at $1.2550. The Third Major Resistance Level sits at $1.2605.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2455 into play. However, barring a US data-off-fueled sell-off, the GBP/USD should avoid sub-$1.24. The Second Major Support Level (S2) at $1.2413 should limit the downside. The Third Major Support Level (S3) sits at $1.2350.

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 $1.24515. 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 ($1.24515) would support a breakout from R1 ($1.2518) to give the bulls a run at R2 ($1.2541) and $1.2550. However, a fall through the 50-day EMA ($1.24515) would bring the 100-day EMA ($1.24246) and S1 ($1.2413) 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 all-important Core PCE Price Index numbers and personal income and spending figures will influence.

This morning, the probability of a 25-basis point Fed interest rate hike in May stood at 87.4%, up from 72.2% on Thursday, according to the CME FedWatch Tool. Hotter-than-expected inflation figures and a pickup in income and spending could fuel the bets on another hike in June. There is a 24.8% chance of a 25-basis point June interest rate hike, up from 13.7% on Thursday.

Away from the economic calendar, US corporate earnings will also influence market risk sentiment. Big names on the US earnings calendar include Exxon Mobil (XOM) and Chevron (CVX).