GBP to USD Forecasts: Bulls Eye $1.2450 on US Debt Deal

It is a quiet Monday session for the GBP/USD. There are no UK economic indicators for investors to consider, with the UK markets closed for the Spring Bank Holiday.

The lack of stats will leave market risk sentiment to provide direction. Weekend updates from Washington on the debt ceiling and the policy outlooks for the BoE and Fed monetary policy will influence.

After the latest economic indicators from the UK and the US, the central banks need to consider further interest rate hikes to combat inflation. However, a more hawkish BoE outlook would raise the threat of a deep recession. In contrast, US economic indicators point to a soft landing, tilting the scales in favor of the dollar.

With the UK markets closed, no Bank of England members are on the calendar to speak today, leaving commentary with the media to move the dial.

GBP to USD Price Action

This morning, the GBP/USD was up 0.07% to $1.23523. A mixed start to the day saw the GBP/USD fall to an early low of $1.23341 before rising to a high of $1.23560.

Technical Indicators

Resistance & Support Levels

The Pound needs to avoid the $1.2350 pivot to target the First Major Resistance Level (R1) at $1.2389 and the Friday high of $1.23952. A return to $1.2350 would signal an extended breakout session. However, the Pound would need US debt ceiling-related news to support a breakout session.

In the event of an extended rally, the GBP/USD would likely test the Second Major Resistance Level (R2) at $1.2434. The Third Major Resistance Level sits at $1.2518.

A fall through the pivot would leave the First Major Support Level (S1) at $1.2304 into play. However, barring another risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.2250. The Second Major Support Level (S2) at $1.2265 should limit the downside. The Third Major Support Level (S3) sits at $1.2181.

Looking at the EMAs and the 4-hourly chart, the EMAs send bearish signals. The GBP/USD sits below the 50-day EMA, currently at $1.24059. The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA converging on the 200-day EMA, delivering bearish signals.

A move through R1 ($1.2389) would give the bulls a run at the 50-day EMA ($1.24059) and R2 ($1.2434). However, failure to move through the 50-day EMA ($1.24059) would leave S1 ($1.2304) in view. A move through the 50-day EMA would send a bullish signal.

The US Session

Looking ahead to the US session, it is a quiet day on the US economic calendar. The US markets are closed for Memorial Day.

With no economic indicators to consider, market sentiment toward the Fed and debt ceiling-related news would move the dial. After the US inflation and personal spending numbers, bets on a June interest rate hike spiked on Friday.

According to the CME FedWatch Tool, the probability of a June hike increased from 51.7% to 64.2%.