GBP to USD Forecasts: Sub-$1.20 in Play as Focus Returns to Inflation

It is a quiet day ahead for the GBP/USD. There are no economic indicators from the UK for investors to consider. The lack of stats will leave market risk sentiment to provide direction through the morning session.

On the political front, Brexit remains a hot topic, with Liz Truss and Prime Minister Rishi Sunak likely to remain in the headlines. The spring Budget is a month away, with the local elections in May. Political wrangling could become a headache for the GBP/USD bulls, with the Tory Party yet to have fully restored confidence following the mini-budget debacle.

While there are no stats to consider, the markets should also consider Monetary Policy Committee Member chatter. However, with no MPC members on the BoE calendar to speak today, investors need to monitor commentary with the media.

GBP/USD Price Action

At the time of writing, the GBP/USD was up 0.08% to $1.20573. A mixed start to the day saw the GBP/USD rise to an early high of 1.20630 before easing back.

Technical Indicators

The Pound needs to move through the $1.2078 pivot to target the First Major Resistance Level (R1) at $1.2109 and the Friday high of $1.21391. A return to $1.21 would signal an extended breakout session. However, the Pound would need risk-on sentiment and hawkish MPC member chatter to support a breakout session.

In the event of an extended rally, the GBP to USD would likely test the Second Major Resistance Level (R2) at $1.2170. The Third Major Resistance Level sits at $1.2262.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1.2017 in play. However, barring a data-off-fueled sell-off, the GBP/USD should avoid sub-$1.1950. The second Major Support Level (S2) at $1.1986 should limit the downside.

The Third Major Support Level (S3) sits at $1.1893.

Looking at the EMAs and the 4-hourly chart, the EMAs send a bearish signal. The GBP/USD sits below the 50-day EMA, currently at $1.21414. The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA narrowing on the 200-day EMA, delivering bearish signals.

A move through R1 ($1.2109) and the 50-day EMA ($1.21414) would give the bulls a run at R2 ($1.2170) and the 200-day EMA ($1.21775). However, failure to move through the 50-day EMA ($1.21414) would support a fall through S1 ($1.2017) to bring S2 ($1.1986) into view.

The US Session

It is a quiet day on the US economic calendar. There are no stats to influence the EUR/USD and market risk sentiment. The lack of stats will leave investors to consider tomorrow’s US CPI Report. A hotter-than-expected CPI Report would fuel bets of a more hawkish Fed policy outlook.

FOMC member chatter will also provide the EUR/USD with direction. However, with no members on the calendar to speak, investors will need to monitor commentary with the media.