GBP/USD Price Jumps Above 1.3250, Stays Rangebound
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- The GBP/USD gained momentum on Tuesday after a two-day losing streak.
- Due to risk dynamics, the US dollar’s position as a safe haven was undermined, and the major currency rallied.
- In the midst of the COVID-19 turmoil, the Fed’s restrictive forecast should help contain the dollar decline and capitalization growth.
The GBP/USD price received new orders at the start of the European session and hit new daily highs between 1.3245-50 in the last hour.
The GBP/USD pair broke two consecutive days of losses on Tuesday after showing some resilience below the 1.3200 level on Monday. This shift in risk sentiment, reflected in the generally positive sentiment in the equity markets, undermined the safe haven of the US dollar. The moderate increase in the major was attributed to this factor.
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The worsening COVID-19 situation may deter traders from aggressive bullish rates around the British pound. It has been reported that the UK has reported an unprecedented number of cases, and 12 people have died from Omicron coronavirus. Also, British Vice Premier Dominic Raab refused to rule out tighter social restrictions before Christmas.
Markets should be dampened by concerns about the rapid growth of the new tribe as well as the fatal blow to US President Biden’s $1.75 trillion spending program. Furthermore, the Fed’s aggressive forecast and rising US Treasury yields should support the dollar, limiting the GBP/USD pair’s earnings.
Additionally, investors may be reluctant to place aggressive bets ahead of the year-end holidays because of the relatively weak liquidity. Due to the lack of relevant market economy releases, be they from the UK or the US, we should caution before positioning any further GBP/USD appreciation.
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GBP/USD price technical analysis: Choppy price action
The GBP/USD price attempts a bullish breakout, but the 20-period SMA on the 4-hour chart is around 1.3260. As the market activity has shrunk, we do not expect a drastic change in prices now. So the price will likely wobble between 1.3200 to 1.3300. However, if the 1.3260 level breaks, bullish bias will weigh heavier. On the flip side, staying below the 1.3200 level may trigger heavy selling towards the YTD lows.
