GBP to USD Forecasts: Return to $1.2550 in the Hands of the BoE

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

US debt ceiling-related news will continue to influence throughout the Wednesday session. However, investors will need to consider the numbers from the week and the likely influence on the Bank of England’s monetary policy goals to curb inflation.

Bank of England Governor Andrew Bailey is on the calendar to speak today. The Bank of England Governor delivered a hawkish outlook on growth but held back from committing to further moves. This week’s stats will not help the BoE’s cause. Labor market conditions deteriorated while wage growth remained elevated.

GBP to USD Price Action

This morning, the GBP/USD was flat at $1.24871. A mixed start to the day saw the GBP/USD fall to an early low of $1.24763 before rising to a high of $1.24938.

Technical Indicators

Resistance & Support Levels

The Pound needs to move through the $1.2499 pivot to target the First Major Resistance Level (R1) at $1.2534 and the Tuesday high of $1.25465. A return to $1.25 would signal an extended breakout session. However, the Pound would need the BoE Governor and US debt ceiling-related news 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 $1.2581. The Third Major Resistance Level sits at $1.2662.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2452 in play. However, barring another risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.24. The Second Major Support Level (S2) at $1.2418 should limit the downside. The Third Major Support Level (S3) sits at $1.2336.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The GBP/USD sits below the 100-day EMA, currently at $1.25215. The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 100-day EMA ($1.25215) would support a breakout from R1 ($1.2534) and 50-day EMA ($1.25338) to target R2 ($1.2581) and $1.26. However, a fall through the 200-day EMA ($1.24623) would bring S1 ($1.2452) into view. A move through the 50-day EMA would send a bullish signal.

The US Session

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

The US housing sector will be in the spotlight, with building permits and housing start numbers in focus.

While investors can consider the housing sector a litmus test of the US macroeconomic environment, the Fed’s focus on inflation and labor market conditions should limit the impact of the numbers on the global financial markets.

With the US economic calendar on the light side, investors should track FOMC member chatter with the media. Fed Chair Powell speaks on Friday, and some members may lay the foundations for the Powell speech.