GBP to USD Forecasts: Risk Aversion to Leave Sub-$1.20 in View

It is a quiet day for the GBP/USD. There are no UK economic indicators to influence the GBP/USD today.

Through the early part of the Monday session, risk aversion weighed on the Pound. News of protests across China over COVID-19 lockdown measures sent riskier assets into the red and drove demand for the Greenback.

Later today, a lack of stats will also leave the Pound in the hands of the BoE and government chatter. However, with no MPC members due to speak today, investors will need to monitor comments to the media.

GBP/USD Price Action

At the time of writing, the Pound was down 0.14% to $1.20693. A mixed morning saw the GBP/USD rise to an early high of $1.20822 before falling to a low of $1.20252.

The Pound fell through the First Major Support Level (S1) at $1.2054 before finding support.

Technical Indicators

The Pound needs to move through the $1.2091 pivot to target the First Major Resistance Level (R1) at $1.2123 and the Friday high of $1.21276. Risk-on sentiment and hawkish MPC member chatter would support a bullish session.

In the case of an extended rally, the GBP/USD would likely take a run at the Second Major Resistance Level (R2) at $1.2160 and $1.22. The Third Major Resistance Level (R3) sits at $1.2230.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2054 in play. However, barring an extended risk-off-fueled pullback, the GBP/USD should avoid sub-$1.20. The Second Major Support Level (S2) at $1.2021 should limit the downside.

The Third Major Support Level (S3) sits at $1.1951.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.19440. 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 Major Support Levels and the 50-day EMA ($1.19440) would support a breakout from R1 ($1.2123) to target R2 ($1.2160) and $1.22. However, a fall through S1 ($1.2054) would bring S2 ($1.2021), S3 ($1.1951), and the 50-day EMA ($1.19440) into view.

The US Session

There are no US economic indicators for the markets to consider, leaving FOMC member chatter to influence. FOMC member Williams will speak today.

However, investors will need to monitor FOMC member commentary with the media. Following last week’s FOMC meeting minutes, hawkish commentary would move the dial.