GBP/USD Price Forecast: A Return to $1.23 Hinged on US GDP Numbers

It was another quiet morning, with no UK economic indicators to provide direction to the Pound. Later today, house price figures are due out but will likely have a muted impact, with risk sentiment likely to influence ahead of US economic indicators later in the day.

There are also no Monetary Policy Committee member speeches on the calendar for the markets to consider.

Following the Fed’s “market-friendly” views on inflation and the economy and the 75-basis point rate, the Pound could come under pressure should US GDP numbers for the second quarter reignite fears of or affirm a US economic recession.

While recent UK economic indicators have beaten forecasts, inflation woes and a hawkish BoE also point to troubles for the UK economy.

GBP/USD Price Action

At the time of writing, the Pound was up by 0.06% to $1.21623

This morning, the Pound fell to an early low of $1.2427 before rising to a high of $1.21860.

Technical Indicators

The Pound needs to hold above the $1.2119 pivot to target resistance at $1.22 and the First Major Resistance Level (R1) at $1.2221.

Going into the European session, a pickup in appetite for riskier assets would support a breakout from the morning high of $1.21860.

An extended rally would test the Second Major Resistance Level (R2) at $1.2288 and resistance at $1.23. The Third Major Resistance Level (R3) sits at $1.2458.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2052 into play.

Barring an extended sell-off, the Pound should avoid sub-$1.20 and the Second Major Support Level (S2) at $1.1949.

The Third Major Support Level (S3) sits at $1.1780.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bullish signal.

At the time of writing, the Pound sat above the 200-day EMA, currently at $1.21035.

The 50-day EMA crossed through the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering positive signals.

The bullish cross of the 50-day EMA through the 100-day EMA should support a breakout from R1 to target R2 and $1.23.

However, a fall through the 200-day EMA would test S1 and support at the 50-day EMA, currently at $1.20217.

The US Session

It is a busy day ahead for the US Dollar, with GDP numbers for the second quarter and weekly jobless claims to draw market interest.

Expect any FOMC member chatter to influence. Ex-Fed Chair Yellen could move the dial, though her speech coincides with the GDP numbers. Words of comfort in, the event of another quarterly contraction, may fall on deaf ears.