GBP to USD Forecasts: Bears Target Return to $1.1950 on Fed Divergence

It is a busy day ahead for the GBP/USD. After a particularly quiet first half of the week, finalized Q3 GDP numbers will draw interest as the holidays approach.

Four days in the red from five sessions leave the GBP/USD vulnerable to a retreat to sub-$1.19 on Fed versus BoE monetary policy divergence.

Today’s would need to come in ahead of prelim numbers to support the GBP/USD. However, following the upbeat US consumer sentiment figures on Wednesday, the UK economy may need to avoid a Q3 contraction to change the narrative.

According to prelim figures, the UK economy contracted by 0.2% in Q3, with the MPC warning that the UK is facing its lengthiest recession on record.

With the economic calendar on the light side, there have been no BoE Monetary Policy Committee Member speeches to guide investors. It is another quiet day ahead, with no MPC members due to speak. However, investors will need to monitor any chatter with the media.

GBP/USD Price Action

At the time of writing, the Pound was down 0.03% to $1.20793. A bearish start to the day saw the GBP/USD fall from an early high of $1.20826 to a low of $1.20712.

Technical Indicators

The Pound needs to move through the $1.2110 pivot to target the First Major Resistance Level (R1) at $1.2165 and the Wednesday high of $1.21919. A return to $1.2150 would signal a bullish session. However, the Pound would need an upward revision to Q3 GDP numbers and a risk-on session to support a breakout.

In the case of an extended rally, the GBP/USD would likely test resistance at $1.22 but fall short of the Second Major Resistance Level at $1.2247. The Third Major Resistance Level (R3) sits at $1.2383.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2028 in play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.1950. The Second Major Support Level (S2) at $1.1973 should limit the downside.

The Third Major Support Level (S3) sits at $1.1836.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 100-day EMA, currently at $1.21565. 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 ($1.21565) and R1 ($1.2165) would bring the 50-day EMA ($1.21902) and $1.22 into play. However, failure to move through the 100-day EMA ($1.21565) would bring S1 ($1.2028) and sub-$1.20 into view. The 200-day EMA sits at $1.20122.

The US Session

It is a busy day ahead, with the weekly jobless claims and finalized Q3 GDP numbers for the markets to consider. With the Fed planning on keeping its foot on the gas, a sharp increase in jobless claims could deliver monetary policy uncertainty.

The markets will also need to consider FOMC member chatter, which could have more impact than the stats.