GBP to USD Forecasts: Bulls to Target $1.29 on Policy Divergence

It is a quiet Thursday session for the GBP to USD. There are no UK economic indicators for investors to consider today. The lack of UK economic indicators will leave the GBP to USD to consolidate Thursday’s gains.

With the economic calendar on the light side, there is little to shift market sentiment toward the Bank of England policy goals and the Fed pause. This week, UK wage growth and GDP numbers supported a hawkish policy outlook, with inflation stubbornly high.

According to figures this week, Wage growth accelerated in April, with the UK returning to economic growth in April.

With no economic indicators to consider, investors should track Bank of England commentary for clues on monetary policy and the economic outlook. However, there are no Monetary Policy Committee members on the calendar to speak, leaving chatter with the media to move the dial.

GBP to USD Price Action

This morning, the GBP/USD was down 0.03% to $1.27781. A mixed start to the day saw the GBP to USD rise to an early high of $1.27930 before falling to a low of $1.27930.

Technical Indicators

Looking at the EMAs and the 4-hourly chart, the EMAs sent bullish signals. The GBP/USD sat above the 50-day EMA, currently at $1.25872. The 50-day EMA pulled further away from the 200-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2679) and the 50-day EMA ($1.25872) would support a breakout from R1 ($1.2836) to target R2 ($1.2889). However, a fall through S1 ($1.2679) would bring the 50-day EMA ($1.25872) and S2 ($1.2576) into view. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The Pound has to avoid the $1.2732 pivot to target the First Major Resistance Level (R1) at $1.2836. A move through the morning high of $1.27930 would signal an extended breakout session. However, the Pound would need central bank chatter to support another bullish session.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2889. The Third Major Resistance Level sits at $1.3045.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2679 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.26 and the Second Major Support Level (S2) at $1.2576. The Third Major Support Level (S3) sits at $1.2420.

The US Session

Looking ahead to the US session, it is a relatively quiet day on the US economic calendar. Prelim Michigan Consumer Sentiment and Expectation figures for June will be in focus. After a mixed set of numbers on Thursday, the Consumer Sentiment and Expectations Indexes would need to improve markedly for any influence on the Fed policy outlook.

Considering the impact of Thursday’s retail sales and jobless claims on Fed sentiment, a pickup in consumer sentiment would suggest higher demand for goods that could translate into a more hawkish Fed and support a July move.

With the US economic calendar on the light side, Fed chatter will draw interest. FMOC members Bullard and Waller are among the first to speak after the Fed blackout period.

According to the CME FedWatch Tool, the probability of a 25-basis point July rate hike stood at 67.0% on Thursday, up from 62.3% on Wednesday.