GBP/USD Price Forecast: Sterling to Repaint $1.3358 Double Top   

• Fears of a new coronavirus variant discovered in South Africa were driving up the US dollar value.
• Goldman Sachs economist says there was a risk that workers would react to rising inflation by demanding higher wages.
• The GBP/USD is trading at $1.3340, heading north to retest the double top resistance level of $1.3360.

The  GBP/USD price forecast remains bullish as the pair spikes to retest the double top resistance level at 1.3360 level. The day before, GBP/USD pair closed at $1.3340 after hitting a high of $1.3369 and a low of $1.3278. After dropping for six consecutive sessions, GBP/USD surged on Friday after falling to its lowest since December 2020.

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BoE chief economist Huw Pill shares the hawkish stance. 

The chief economist of the Bank of England, Huw Pill, said on Friday that the UK’s economic recovery from the pandemic was strong enough for the bank to take policy action regardless of the fears over the new variant of the coronavirus. 

These remarks raised expectations that the BOE would raise borrowing costs next month. The positive comments from Pill boosted the British Pound on Friday, reversing the downward trend in the GBP/USD that had been in place for the previous six sessions.

Former Goldman Sachs economist stance on the UK economy

According to Pill, who is a former Goldman Sachs economist and joined the BOE in September, there was a risk that workers would react to rising inflation by demanding higher wages, which would feed into a wage-price spiral that would damage the economy. The mixed comments from Pill at the same time also had a negative impact on GBP, which kept the gains in GBP/USD limited for the session.

Meanwhile, the gains in the British Pound’s riskier currency were limited due to the prevailing risk-off market sentiment driven by discovering a new variant of the coronavirus in South Africa. According to researchers, the variant was much more transmissible than previous variants, and that they were working on finding its immunity level against vaccines. This uncertainty and spread fears exacerbated risk-off market sentiment and had a much greater impact on the British Pound than on other currencies due to its riskier status. 

As a result of Sterling’s weakness, GBP/USD prices fell to their lowest level since December 2020, but the pair recovered during late trading hours after Pill raised expectations of rising interest rates sooner than expected.

Stronger greenback weighs on GBP/USD

Furthermore, the US dollar was also high as the DXY was moving higher at the 96.28 level. Fears of a new coronavirus variant discovered in South Africa were driving up the US dollar value. As a result, the US dollar was receiving inflows amid its safe-haven nature as fears of further spreading more contagious and potential vaccine-resistant variants were raised in the market. 

Despite the rising strength of the US dollar in the absence of more traders due to the holiday season, the currency pair GBP/USD still managed to remain strong across the market. The rising prices of GBP/USD could also be attributed to profit-taking and a correction.

GBP/USD price forecast – Daily technical levels

Support Resistance

1.3330 1.3348

1.3318 1.3356

1.3311 13367

Pivot Point: 1.3337

GBP/USD price forecast: Double top extend resistance at $1.3360 

The GBP/USD is trading at $1.3340, heading north to retest the double top resistance level of $1.3360. On the 4-hour timeframe, the GBP/USD is closing a series of spinning star candles, indicating a weakness. Besides, the series of exponential moving averages support a selling bias at the 1.3350 level. Thus, the formation of candlesticks under these lines adds further selling pressure on GBP/USD. A spike in selling pressure could lower the GBP/USD price towards the $1.3300 or $1.3276 level. 

On the flip side, the RSI and Stochastic have entered the buying zone, respectively, above 50, boosting the odds of an upward breakout. The $1.3358 is an immediate barrier. However, a slice through the $1.3358 can drive bulls to the $1.3415 or $1.3474 level. 

Consider catching a sell position under $1.3358, with immediate targets at $1.3280 and $1.3265. Alternatively, the $1.3360 breakout can help us secure a quick buy trade until $1.3415 or $1.3475. Good luck, and stay tuned for more updates!