GBP/USD Price Forecast – 38.2% Fibonacci Retracement in Play
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- US dollar was strong across the board, supported by the higher Treasury Yields, and hovered around 96.0.
- Banks in the United Kingdom will remain closed amid Boxing Day.
- A spike in bullish pressure, especially above 1.3380, can trigger a bounce off until 1.3435 and 1.3504.
The GBP/USD price forecast remains bullish. However, the overbought pair seems to exhibit a bearish correction until 1.3335. The day before, the GBP/USD pair closed at $1.3386 after placing a high of $1.3422 and a low of $1.3384. After rising for three consecutive sessions, GBP/USD dropped on Friday and lost some of its previous session’s gains.
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GBP/USD set to retrace amid stronger US dollar
The US dollar was strong across the board, supported by the higher Treasury yields, and hovered around 96.0. The US Treasury yield continued its rising trend for four consecutive sessions and reached 1.50%. The strength of the US dollar ahead of Christmas Eve added negative pressure on the currency pair GBP/USD.
COVID-19 concerns continue to weigh
On Friday, Britain reported another day of record coronavirus cases, with new estimates reporting more and more London people were getting infected due to the rapid spread of the Omicron variant. In London, the increased spread of Omicron has driven a massive surge in infections over the last seven days.
The Office for National Statistics said on Friday that about 1 in 20 people from London likely had coronavirus, and it might rise to 1 in 10 people by Sunday. The daily hospitalizations in England were up by about 40% in a week, and the NHS leaders were raising alarms as the UK recorded 1171 people being hospitalised in 24 hours, which set another record for daily cases.
Given the increased number of infections and hospitalization rates in the UK, the UK researchers warned people that if anyone had a sore throat, headache, and runny nose, there was a good chance that it was COVID. However, the increased spread of the Omicron variant in the UK kept its currency, Sterling, under pressure on Friday and dragged GBP/USD to the downside.
The odds of full post-Brexit customs controls weaken GBP.
The British pound was also down on Friday after the trade and logistics chief of the UK warned. Full post-Brexit customs controls were nearly in force on New Year’s Day. That will likely cause significant disruption and could see some British businesses collapse.
According to the deal, UK companies must make customs declarations for goods imported from the EU from January 1, 2022. Apart from this, British importers and exporters will also have to provide extra paperwork required for food, drink, and products of animal origin to avoid tariffs and get a reduced rate of customs duty. This thing also kept sterling lower and dragged GBP/USD further to the downside.
Dollar standstill ahead of Christmas
The US dollar remained unchanged, primarily as traders struggled to find a direction ahead of Christmas. It looked like people were closing their positions before heading on vacation, causing some subdued momentum in the market. Meanwhile, the small gains DXY posted on its last day of trading added some strength to the dollar, which ultimately added further downside pressure on the GBP/USD currency pair in the absence of any macroeconomic data figures from either side.
GBP/USD to trade choppy amid UK bank holiday
Banks in the United Kingdom will remain closed on Boxing Day. Except for Christmas and New Year’s Day, most Forex brokers are open on all holidays. Banks and stock exchanges have slightly varying holiday schedules.
Banks handle the majority of foreign currency volume. When they are closed, the market becomes less liquid, and speculators gain greater market power. This might result in both unusually low and very high volatility.
GBP/USD price forecast – Daily technical levels
Support Resistance
1.3351 1.3449
1.3297 1.3493
1.3254 1.3546
Pivot Point: 1.3395
GBP/USD price forecast- 38.2% Fibonacci Retracement in Play
The GBP/USD traded bullish to reach the 1.3387 level. However, the closing of candles under the 1.3440 resistance signals the chances of a bearish correction. The GBP/USD pair surged on Friday to retest the 1.3440 resistance level but failed to cross it. As a result, the closing candle below 1.3440 initiated a sell-off in Sterling. On the 2-hour timeframe, the GBP/USD has closed Shooting Star and Doji candles, indicating a weakness in the bullish bias.
Alongside, the RSI has started coming out of the overbought zone, signaling the odds of a correction. Thus, the GBP/USD can drop towards 1.3387 (23.6% Fibonacci level), and a break below this exposes the pair towards the 1.333 level. A 38.2% Fibonacci correction level is extending that particular level. A surge in selling pressure can lead GBP/USD towards the 1.3180 level, which is being extended by a 61.8% Fibonacci retracement point.
Conversely, a spike in bullish pressure, especially above 1.3380, can trigger a bounce off until 1.3435 and 1.3504. The leading technical tools like the RSI and Stochastic RSI hold above 50, indicating a bullish trend. Moreover, the 50-day EMA (exponential moving average) supports an uptrend. Therefore, a spike in demand at the current market level could lead GBP/USD towards 1.3440. A breakout of the 1.3440 level could trigger a further uptrend until the 1.3504 mark.
The forex market can exhibit thin trading volumes and volatility amid the Christmas and New Year holidays. Good luck, and stay tuned for more updates!
