GBP to USD Forecasts: Weak ADP Nonfarm Numbers to Deliver $1.21

It is a relatively quiet day ahead for the GBP/USD. Finalized UK services and composite PMI numbers for December will be in focus this morning. The markets will be looking for revisions to the services PMI.

On Tuesday, the manufacturing survey revealed Brexit issues, weighing on demand. A deeper contraction in the manufacturing sector and a grim outlook weighed on the GBP/USD.

The services PMI will need to impress to ease pressure on the GBP/USD. However, a downward revision would send the Pound further south. According to prelim figures, the services PMI rose from 48.8 to 50.0 in December. While the headline figure will influence, expect interest in the sub-components, particularly new orders, inflation, and employment.

Following the holidays, no MPC members are due to speak today to give the markets a peak at the Bank’s views on the economic outlook, COVID-19, and monetary policy.

However, the Bank of England will publish monthly Decision Maker Panel (DMP) data for December 2022. The DMP is a survey of Chief Financial Officers from small, medium, and large UK businesses that assist the BoE in tracking economic developments and business views.

GBP/USD Price Action

At the time of writing, the Pound was down 0.15% to $1.20352. A choppy morning saw the GBP to USD rise to an early high of $1.20785 before falling to a low of $1.20320.

Technical Indicators

The Pound needs to avoid the $1.2032 pivot to target the First Major Resistance Level (R1) at $1.2108. A move through the Wednesday high of $1.20875 would signal a bullish afternoon session. However, the Pound would need today’s stats to support a breakout session.

In the event of an extended rally, the GBP to USD would likely test the Second Major Resistance Level (R2) at $1.2163. The Third Major Resistance Level sits at $1.2294.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1977 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.1950 and the Second Major Support Level (S2) at $1.1902.

The Third Major Support Level (S3) sits at $1.1771.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.20525. The 50-day EMA closed in on the 200-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bearish signals.

A move through the 50-day EMA ($1.20525) would support a breakout from the 100-day EMA ($1.20766) to bring R1 ($1.2108) into play. A move through the 50-day EMA would send a bullish signal. However, a fall through the 200-day EMA ($1.20259) would give the bears a run at sub-$1.20 and S1 ($1.1977).

The US Session

It is a busy day ahead on the economic calendar. ADP nonfarm employment change and weekly jobless claims will draw plenty of interest early in the US session. Later in the day, finalized Markit-survey service and composite PMIs will also influence.

Investors should also look out for any FOMC member commentary. Following the holidays, the markets are looking for a response to the latest round of economic indicators. FOMC members Bostic and Bullard are slated to speak today.