GBP to USD Forecasts: Bulls Eye $1.26 on US ADP and ISM PMI Numbers

It is a relatively quiet day ahead for the GBP/USD. The finalized UK services and composite PMIs will be in focus. Upward revisions to the services PMI would support a bullish morning session.

According to prelim figures, the services PMI fell from 53.5 to 52.8 in March.

With the economic calendar on the light side, investors should track BoE member commentary. Monetary Policy Committee member Silvana Tenreyro is delivering a speech today.

Despite the latest inflation numbers and more resilient UK economy, Tenreyro delivered dovish comments on Tuesday. Tenreyro reportedly said,

“I expect that the high current level of Bank Rate will require and earlier and faster reversal, to avoid a significant inflation undershoot.”

GBP/USD Price Action

This morning, the GBP/USD was down 0.04% to $1.24956. A mixed start to the day saw the GBP/USD rise to an early high of $1.25106 before easing back to sub-$1.25.

Technical Indicators

The Pound needs to avoid the $1.2473 pivot to target the First Major Resistance Level (R1) at $1.2552. A move through the Tuesday high of $1.25252 would signal an extended breakout session. However, the Pound would need risk-on sentiment and weak US economic indicators 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 $1.2604. The Third Major Resistance Level sits at $1.2734.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2421 into play. However, barring a risk-off-fueled sell-off, the GBP/USD should avoid sub-$1.24 and the Second Major Support Level (S2) at $1.2343. Third Major Support Level (S3) sits at $1.2213.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bullish signal. The GBP/USD sits above the 50-day EMA, currently at $1.23531. The 50-day EMA pulled further away from the 100-day EMA, with the 100-day EMA widening from the 200-day EMA, delivering bullish signals.

A hold above S1 ($1.2421) and the 50-day EMA ($1.23531) would support a breakout from R1 ($1.2552) to target R2 ($1.2604). However, a fall through S1 ($1.2421) would give the bears a run at the 50-day EMA ($1.23531) and S2 ($1.2343). A fall through the 50-day EMA would send a bearish signal.

The US Session

Looking ahead to the US session, it is a busy day on the US economic calendar. US ISM Non-Manufacturing PMI and ADP nonfarm employment change will draw interest.

The reports will move the dial, considering the market sensitivity to the JOLTs job openings,

Other stats include trade data and finalized markit survey services PMI numbers, which should have a muted impact on the GBP/USD.

Investors should also monitor Fed chatter on monetary policy and the US economy.