GBP to USD Forecasts: Bulls to Target $1.2650 on BoE Governor Bailey

It is a relatively quiet day ahead for the GBP/USD. UK services and composite PMI numbers for April will be in focus. While these are finalized numbers, we expect GBP/USD sensitivity to any services PMI revisions.

The UK economy has performed better than expected. However, UK inflation remains elevated, at 10.1%, giving the Bank of England plenty to consider before next week’s Monetary Policy Committee decision.

With private sector PMIs in focus, investors should monitor Bank of England chatter. Bank of England Governor Andrew Bailey is on the calendar to speak today.

Bailey will speak at the Building Societies Annual Conference, with forward guidance on monetary policy likely to move the dial. However, investors should track the media for Monetary Policy Committee member comments.

GBP to USD Price Action

This morning, the GBP/USD was up 0.16% to $1.25836. A mixed start to the day saw the GBP/USD fall to an early low of $1.25463 before rising to a high of $1.25921.

Technical Indicators

Resistance & Support Levels

The Pound needs to avoid the $1.2538 pivot to target the First Major Resistance Level (R1) at $1.2616. A move through the morning high of $1.25921 would signal an extended breakout session. However, the Pound would need UK economic indicators and hawkish BoE comments 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 $1.2668. The Third Major Resistance Level sits at $1.2799.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2485 into play. However, barring a BoE-fueled sell-off, the GBP/USD should avoid sub-$1.2450 and the Second Major Support Level (S2) at $1.2407. The Third Major Support Level (S3) sits at $1.2277.

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 $1.24925. 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 ($1.24925) would support a breakout from R1 ($1.2616) to give the bulls a run at R2 ($1.2668). However, a fall through the 50-day EMA ($1.24925) and S1 ($1.2485) would bring the 100-day EMA ($1.24603) and S2 ($1.2407) 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. US jobless claims, nonfarm productivity, and unit labor costs will draw interest before Friday’s US Jobs Report.

Hotter-than-expected unit labor costs and a fall in jobless claims would fuel bets on more Fed interest rate hikes.

While investors will consider the stats, the banking sector, the US debt ceiling, and corporate earnings will influence market risk sentiment. Big names on the US earnings calendar include Apple (AAPL), ConocoPhillips (COP), Shopify Inc. (SHOP), and Moderna (MRNA).