GBP/USD Price Forecast: Descending Triangle to Underpin at $1.3213
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- Initial reports from South Africa, indicating that Omicron patients had relatively minor symptoms.
- On the USD front, the broad-based US dollar was supported by the prospect of the Fed tightening policy more quickly.
- The GBP/USD is still attempting to break over the resistance level of 1.3287.
The GBP/USD price forecast remains bullish as the pair spikes above the double bottom support level of $1.3211. The day before, the GBP/USD coin extended its early-day bearish bias and stayed pressured around the 1.3220 level. Previously, the GBP/USD has traded in a bearish phase around the 1.3230-35 level.
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During the early European session, the pair managed to hold the 1.3200 barrier and attract some buying, albeit the attempted recovery was short-lived due to renewed US dollar strength. The US dollar was back in demand, buoyed by faster Fed policy tightening expectations. On the other hand, Brexit-related uncertainties have a negative impact on the GBP/USD currency pair.
COVID19 concerns – Omicron patients exhibit symptoms
Initial reports from South Africa, indicating that Omicron patients had relatively minor symptoms, helped stabilize global risk sentiment. This was evidenced by a generally upbeat tone in the equity markets, which could deter dollar bulls from placing new bullish bets and limit the GBP/USD pair’s downside. The EUR/USD is trading at 1.3231 and consolidating in the range between 1.3220 and 1.3255.
Since the start of the new week, the market trading sentiment has been flashing green signals. However, the latest expectations of finding a cure for the South African COVID strain termed Omicron has benefited the market sentiment. After initially affecting Europe and the United Kingdom, the virus strain tightens its grip on key global nations such as the United States and China.
On the other hand, global scientists are optimistic about discovering a cure for the COVID-19 strain. The US’s top medical officer, Anthony Fauci, recently approved Pfizer’s medicine as effective against Omicron, while news of chewing gum to stop the virus’ spread and the UK’s campaign for treatment also gives traders hope. A generally upbeat mood witnessed this in the equity markets, which could deter USD bulls from making new bullish bets and limit the GBP/USD pair’s downside.
Stronger greenback weighs on GBP/USD
On the USD front, the broad-based US dollar was supported by the prospect of the Fed tightening policy more quickly. Traders appear to believe that the Fed will be obliged to take more aggressive policy measures to keep inflation under control. Indeed, the money markets predict that the Fed will raise rates by May 2022, boosting the greenback.
The GBP/USD pair’s gain was restrained by this, as well as Brexit-related uncertainty. The US Dollar Index increased 0.16 percent to 96.270. Moving on, the scheduled speech by Bank of England Deputy Governor Ben Broadbent could influence the GBP and give the GBP/USD pair some momentum. This, along with broader market risk sentiment, will be scrutinized for some short-term trading opportunities in the major.
What’s next?
There is no crucial economic news scheduled for release in the United States today. Therefore, the currency traders will focus on the Construction PMI report from the United Kingdom. Analysts anticipate that the Construction PMI will fall from 54.6 in October to 54.2 in November.
Traders will also keep their focus on US government bond markets developments. For example, the yield on 2-year Treasuries continues at yearly highs, while the yield on 10-year Treasuries is attempting to recover from the recent decline. Higher yields may provide extra support to the US dollar.
GBP/USD price forecast: Daily support and resistance
S3 1.319
S2 1.3247
S1 1.3275
Pivot Point 1.3304
R1 1.3332
R2 1.3361
R3 1.3419
GBP/USD price forecast: Double top extend resistance at $1.3360
The GBP/USD is still attempting to break over the resistance level of 1.3287. If the GBP/USD manages to reclaim this level, it will move on to the next resistance level at 1.3325. A break over 1.3325 will pave the door for a test of the next resistance level, at 1.3345. If GBP/USD rises above 1.3345 again, the next resistance level will be approached at 1.3375.
GBP/USD must remain below 1.3287 to have a chance of developing downward momentum in the near term. The next level of support for GBP/USD is at the recent lows at 1.3210. A successful support test at 1.3210 will pave the door for the following support level at 1.3170 to be tested. The RSI is approaching oversold territory, but there is still enough room for more bearish momentum to materialize if the correct catalysts emerge. For example, if the GBP/USD falls below the support level of 1.3170, it will move towards the support level of 1.3140.
On the flip side, the RSI and Stochastic have entered the buying zone, respectively, above 50, boosting the odds of an upward breakout. The 1.3287 is an immediate barrier. However, a slice through the 1.3287 can drive bulls in the market. For example, consider catching a sell position under .3287, with immediate targets at 1.3215 and 1.3165. Alternatively, the 1.3285 breakouts can help us secure a quick buy trade. Good luck, and stay tuned for more updates!
