GBP/USD Price Forecast: “Risk on” Sentiment to Bring $1.22 into View

It is a quiet day ahead on the UK economic calendar. There are no UK economic indicators to provide the Pound with direction.

Following Thursday’s rate hike and the end-of-week monetary policy report briefing, there are no scheduled Monetary Policy Committee member speeches to provide direction.

The lack of stats and Bank of England commentary will leave the Pound in the hands of market risk sentiment. Friday’s US nonfarm payroll numbers were exceptionally high. The markets may begin betting on a sizeable downward revision that would provide Pound support.

However, the focus will shift away from the NFP numbers going into Wednesday, with US inflation numbers due for release.

GBP/USD Price Action

At the time of writing, the Pound was up 0.32% to $1.21054.

This morning, the Pound fell to an early low of $1.20473 before rising to a high of $1.21086.

Technical Indicators

The Pound will need to avoid the $1.2080 pivot to target the First Major Resistance Level (R1) at $1.2157 and the Friday high of $1.21691.

The GBP/USD pair would need a marked pickup in risk sentiment to support a return to $1.2150.

In the event of an extended rally, the GBP/USD pair could test resistance at $1.22 but fall short of the Second Major Resistance Level (R2) at $1.2246.

The Third Major Resistance Level (R3) sits at $1.2412.

A fall through the pivot would likely see the Pound test support at $1.20 and the First Major Support Level (S1) at $1.1990.

In case of an extended sell-off, the GBP/USD pair could test the Second Major Support Level (S2) at $1.1914.

The Third Major Support Level (S3) sits at $1.1747.

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

At the time of writing, the Pound sat above the 100-day EMA, currently at $1.20962.

This morning, the 50-day EMA converged on the 200-day EMA, with the 100-day EMA flat against the 200-day EMA, delivering bearish signals.

A bearish cross of the 50-day EMA through the 200-day EMA would bring sub-$1.20 into play.

However, a GBP move through the 50 and 200-day EMAs would bring R1 (1.2157) and $1.22 into view.

The US Session

It is a quiet day ahead, with no economic indicators for the markets to consider. With no scheduled FOMC member speeches, investors will juggle the recent string of upbeat stats with sentiment towards the Fed policy decision.

The Fed will be privy to another round of stats before the September move, which could ease Dollar demand. However, US inflation figures on Wednesday could prove telling.