GBP to USD Forecasts: Dip Buyers to Target $1.2750 in a Quiet Session

Highlight

• The GBP to USD found support this morning, with dip buyers providing early gains.
• There are no UK economic indicators today to change the narrative, leaving BoE commentary to move the dial.
• It is also a quiet day on the US economic calendar, leaving the pair in the hands of Fed chatter.

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

After the bearish week for the GBP to USD, investors need UK economic indicators to reflect economic resilience to deliver support. UK numbers on Friday sent mixed signals. While retail sales unexpectedly rose in May, private sector activity slowed. Nonetheless, the UK services sector remained in expansion mode, with the PMI down from 55.2 to 53.7.

With the GBP to USD now shrouded with economic and monetary policy uncertainty, investors must track Bank of England chatter. However, no Monetary Policy Committee members on the calendar to speak, leaving comments with the media to move the dial.

GBP to USD Price Action

This morning, the GBP/USD was up 0.13% to $1.27312. A mixed start to the day saw the GBP to USD fall to an early low of $1.26983 before rising to a high of $1.27389.

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 $1.27120. 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 the 50-day EMA ($1.27120) would support a breakout from R1 ($1.2748) to target R2 ($1.2781) and $1.28. However, a fall through the 50-day EMA ($1.27120) would bring S1 ($1.2683) into view. A fall through the 50-day EMA would send a bearish signal.

Resistance & Support Levels

The US Session

Looking forward to the US session, there are no US economic indicators to influence. The lack of economic indicators will leave the GBP to USD in the hands of Fed chatter. Hawkish chatter would support a dollar recovery through the afternoon ahead of influential US stats this week.

This morning, bets on a July Fed interest rate hike remained elevated despite manufacturing sector woes. According to the CME FedWatch Tool, the probability of a 25-basis point July Fed rate hike stood at 71.9% versus 74.4% one week ago.

Significantly, the chances of the Fed lifting rates to 5.75% in September stood at 11.5%, up from 8.9% one week earlier, leaving monetary policy divergence in favor of the greenback.

While the BoE delivered a surprise move on Thursday, the risks of a UK recession have risen. In contrast, the latest US services sector PMI numbers suggest a resilient US economy, allowing the Fed to hit a peak Fed Funds Rate of 5.6% and avoid a hard landing.