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GBP to USD Forecasts: Fed Bets and US Stats to Bring $1.25 into View

By:
Bob Mason
Published: Jun 1, 2023, 04:11 UTC

It is a relatively busy day for the GBP to USD. US debt ceiling news, Fed chatter, and US labor market stats will be in focus later today.

GBP to USD - Tech Analysis - FX Empire

In this article:

It is a relatively quiet Thursday session for the GBP/USD. Finalized UK manufacturing PMI numbers for May will be in focus this afternoon. Investors should consider revisions to the prelim survey, with wage growth, input and output costs, and new orders focal points.

With the UK economic calendar on the light side, the GBP/USD will remain in the hands of market risk sentiment ahead of the PMI numbers. Investor sentiment toward the economic outlook and US debt ceiling-related news will remain the key drivers ahead of the US session.

Investors should also continue to monitor Bank of England chatter. However, no Monetary Policy Committee members are on the calendar to speak today, leaving commentary with the media to influence.

However, private sector PMIs from China set the tone for a second consecutive session this morning.

China’s all-important Caixin Manufacturing PMI for May gave investors a better view of the macroeconomic environment midway through the second quarter. The all-important Caixin Manufacturing PMI increased from 49.5 to 50.9 in May versus a forecasted 50.3.

News of the US House of Representatives vote on the US debt ceiling deal also needs consideration after a vote in favor of the debt ceiling deal.

GBP to USD Price Action

This morning, the GBP/USD was down 0.04% to $1.24325. A mixed start to the day saw the GBP to USD fall to an early low of $1.24236 before rising to a high of $1.24494.

GBP to USD sees early red.
GBPUSD 010623 Daily Chart

Technical Indicators

Resistance & Support Levels

R1 – $ 1.2472 S1 – $ 1.2376
R2 – $ 1.2506 S2 – $ 1.2314
R3 – $ 1.2602 S3 – $ 1.2217

The Pound needs to avoid the $1.2410 pivot to target the First Major Resistance Level (R1) at $1.2472. A move through the Wednesday high of $1.2444 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 $1.2506. The Third Major Resistance Level sits at $1.2602.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2386 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.23. The Second Major Support Level (S2) at $1.2314 should limit the downside. The Third Major Support Level (S3) sits at $1.2217.

GBP to USD resistance levels in play above the pivot.
GBPUSD 010623 Hourly Chart

Looking at the EMAs and the 4-hourly chart, the EMAs send bullish signals. The GBP/USD sits above the 200-day EMA, currently at $1.24303. The 50-day EMA narrowed to the 200-day EMA, with the 100-day EMA converging the 200-day EMA, delivering bullish signals.

A hold above the EMAs would support a breakout from R1 ($1.2472) to give the bulls a run at R2 ($1.2506). However, failure to move through the EMAs would bring S1 ($1.2376) into view. A fall through the 50-day EMA ($1.23985) would send a bearish signal.

EMAs are bullish.
GBPUSD 010623 4-Hourly Chart

The US Session

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

ADP nonfarm employment change, initial jobless claims, and the ISM Manufacturing PMI will move the dial. While investors are pricing in a more dovish Fed, solid labor market numbers could refuel bets on a 25-basis point June interest rate hike.

According to the CME FedWatch Tool, the chances of a 25-basis point interest rate hike tumbled from 66.6 to 26.4% on Wednesday as the markets responded to Fed chatter that favored a June pause.

However, FOMC members and US debt ceiling-related news will also need consideration later today.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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