GBP to USD Forecasts: Bulls to Target $1.26 on UK Stats and Huw Pill

It is a busy day ahead for the GBP/USD. The UK GDP Report for February will draw interest later this morning. UK economic indicators have continued to impress, reflecting a resilient economy despite the inflation-central bank influence on consumption.

Economists forecast the UK economy to expand by 0.1% in February, following 0.3% growth in January. However, economists expect the UK economy to stall for a second consecutive month on a 3-month rolling basis.

Other stats include industrial and manufacturing production, trade data, and the NZIER monthly GDP tracker figures. We expect the manufacturing production numbers to garner more interest. However, the numbers must beat expectations to offset recent dovish Monetary Policy Committee member chatter.

Last Tuesday. MPC member Silvana Tenreyro talked about cutting rates earlier and faster. Tenreyro was also in focus on Wednesday, discussing the impact of a persistent rise in bank funding costs on the UK economy.

While the economic calendar is busier, investors should continue monitoring the Bank of England’s forward guidance on inflation, economic outlook, and monetary policy.

Bank of England Governor Chief Economist Huw Pill will speak this afternoon. Forward guidance on inflation, the UK economy, and monetary policy will move the dial. Following the FOMC meeting minutes from Wednesday, a hawkish BoE would support a GBP/USD breakout.

GBP/USD Price Action

This morning, the GBP/USD was up 0.06% to $1.24917. A mixed start to the day saw the GBP/USD fall to an early low of $1.24774 before rising to a high of $1.24965.

Technical Indicators

The Pound needs to avoid the $1.2459 pivot to target the First Major Resistance Level (R1) at $1.2520. A move through the morning high of $1.24965 would signal an extended breakout session. However, the Pound would need hawkish BoE chatter and better-than-expected GDP numbers 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 $1.2556 but fall short of $1.26. The Third Major Resistance Level sits at $1.2653.

A fall through the pivot would bring the First Major Support Level (S1) at $1.2424 into play. However, barring a Fed-fueled sell-off, the GBP/USD should avoid sub-$1.24 and the Second Major Support Level (S2) at $1.2363. Third Major Support Level (S3) sits at $1.2266.

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 $1.24170. 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 ($1.2424) and the 50-day EMA ($1.24170) would support a breakout from R1 ($1.2520) to target R2 ($1.2556) and $1.26. However, a fall through S1 ($1.2424) and the 50-day EMA ($1.24170) would give the bears a run at S2 ($1.2363) and the 100-day EMA ($1.23584). 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 wholesale inflation and jobless claims will be in focus.

Following the softer-than-expected US CPI Report, a hotter-than-expected producer price index would test the theory of a Fed rate pause. However, initial jobless claims should increase modestly to support a hawkish policy outlook.

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