GBP/USD Price Forecast: A Fall to sub-$1.2030 Brings $1.1970 into View

It was another quiet morning, with no UK economic indicators to provide direction to the Pound. Later today, CBI Distributive Trades numbers for July are due but will likely have a muted impact on the GBP/USD pair.

Last Friday’s private sector PMI numbers for July eased some immediate fears of an economic recession, while the figures highlighted upward pressure on wage growth.

With the Bank of England focused on wage growth and other sub-components of inflation, bets of a 50 basis point hike are firming. However, the Fed is up first, with GBP/USD needing to wait until August 4 for the big decision.

Between now and the big day, finalized private sector PMIs for July will be all the markets have to shift sentiment towards the August 4 decision. There are also no Monetary Policy Member (MPC) speeches in the Bank of England calendar to provide direction.

The lack of MPC member influence will likely leave the Pound in the hands of the Fed before attention turns to the Bank of England.

Ahead of the Fed policy decision, market risk sentiment will provide the GBP/USD pair with direction. The markets are unlikely to bet on the BoE lifting rates by more than 50 basis points.

GBP/USD Price Action

At the time of writing, the Pound was flat at $1.20395.

This morning, the Pound rose to an early high of $1.20902 before falling to a low of $1.20350.

Technical Indicators

The Pound needs to hold above the $1.2029 pivot to target the First Major Resistance Level (R1) at $1.2097.

A pickup in appetite for riskier assets would support a breakout from the Monday high of $1.20861.

An extended rally would test the Second Major Resistance Level (R2) at $1.2154. The Third Major Resistance Level (R3) sits at $1.2280.

A fall through the pivot would bring the First Major Support Level (S1) at $1.1971 into play.

Barring an extended sell-off, the Pound should steer clear of sub-$1.1950 and the Second Major Support Level (S2) at $1.1902.

The Third Major Support Level (S3) sits at $1.1778.

Looking at the EMAs and the 4-hourly candlestick chart (below), it is a bearish signal.

At the time of writing, the Pound sat above the 100-day EMA, currently at $1.120042.

The 50-day EMA closed in on the 100-day EMA, with the 100-day EMA narrowing to the 200-day EMA, delivering bullish GBP/USD signals.

A move through R1 and the 200-day EMA, currently at $1.21066, would bring R2 into play.

However, a fall through the 100-day EMA would test support at the 50-day EMA, currently at $1.19831 and S1.

The US Session

After a quiet start to the week, the focus shifts to consumer confidence. Ahead of Thursday’s GDP numbers, fears of a US recession are mounting. Weak numbers will test support for riskier assets and likely pressure the GBP/USD pair.

Away from monetary policy and the economic calendar, the US earnings calendar could also influence.

The US Session

After a quiet start to the week, the focus shifts to consumer confidence. Ahead of Thursday’s GDP numbers, fears of a US recession are mounting. Weak numbers will test support for riskier assets and likely pressure the GBP/USD pair.