Forecasts for GBP/USD: Bulls Target $1.2150 on Dollar Weakness

The GBP/USD is set to have a calm day. With the UK markets closed today, there are no UK economic indications for the markets to examine.

With the European and US markets reopening today, we may anticipate some price activity after Monday's range-bound session.

Early GBP/USD support was provided by a risk-on attitude. The news that China would no longer need quarantine for inbound passengers beginning January 8 fueled a strong start to the day. The markets also reacted to the National Health Commission lowering the severity of COVID-19.

The Financial Times reported an increase in footfalls compared to December 26, 2021, providing more support for the Pound. Springboard indicated that footfall was up 50% on December 26, 2022, compared to December 26, 2021, according to the FT Report. However, compared to pre-pandemic levels, numbers were down 25.3%.

With little other data to rely on, the footfall figures were strong enough to fuel a post-holiday rise.

However, market perception of monetary policy divergence remains the primary driver. Following Friday's lower US inflation figures, investors anticipate the Fed to pursue a less aggressive interest rate stance. Fed hawkishness might undo today's gains.

There are no MPC members scheduled to speak today, putting the GBP/USD at the mercy of market risk sentiment.

GBP/USD Price Movement

The Pound was up 0.36% at $1.2097 at the time of writing. The GBP/USD exchange rate rose from an early low of $1.20525 to a high of $1.21026 before easing down.

The GBP/USD exchange rate breached the First Major Resistance Level (R1) at $1,2070 and the Second Major Resistance Level (R2) at $1.2087.

Indicators of Technical Performance

To retarget the Third Major Resistance Level (R3) at $1.2116, the Pound must avoid a decline through R2, R1, and the $1.2058 pivot. A rebound to $1.21 would indicate a positive afternoon session. The Pound, on the other hand, would need a risk-on session to complement a breakout session.

A breakthrough R2, R1, and the pivot would activate the First Major Support Level (S1) at $1.2041. However, unless there is a risk-off sell-off, the GBP/USD should avoid the Second Major Support Level (S2) around $1.2029.

$1.2000 is the Third Major Support Level (S3).

The EMAs and the 4-hourly chart both indicate a bearish indication. The GBP/USD is now trading below the 50-day EMA at $1.21269. Following Monday's bearish cross, the 50-day EMA retreated from the 100-day EMA, while the 100-day EMA narrowed to the 200-day EMA, signaling bearishness.

A break of R3 ($1.2116) would activate the 50-day ($1.21269) and 100-day ($1.21291) EMAs. A break over the 50-day moving average would be a positive indication. However, a break of S1 ($1.2041) would allow the bulls to attack S2 ($1.2029) and the 200-day EMA ($1.20199).

The United States Session

The US housing market and trade statistics will be the main focus of the day. Unless the US trade deficit widens significantly, the housing sector figures will likely have greater sway.

While mortgage rates are falling, application demand has been modest due to economic worries. Falling prices, limited demand, and high mortgage rates are all disadvantages for the industry.

Following the holidays and the previous week's US economic figures, investors should keep an eye out for any FOMC member remarks. The markets are anticipating a reaction to the most recent private sector PMIs and inflation statistics.

Follow us for more Forex Analysis news.

Download and install the WikiFX App on your mobile phones from the download link to stay updated on the latest news, even on the go.

Download link: https://www.wikifx.com/en/download.html