GBP/USD Price Forecast – What Could Trigger a Sharp Move to $1.3465
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- The latest comments from European Commission Vice President Maros Sefcovic added to the pressure on GBP.
- The rising number of coronavirus cases in the UK due to the rapid spread of the Omicron variant also weighed on the British Pound.
- GBP/USD breaks over the 1.3460 level might initiate a new rise till the 1.3504 level.
On Wednesday, the GBP/USD price forecast remains neutral as the pair is tossing in a narrow range of 1.3460 to 1.3385. The day before, the GBP/USD was closed at $1.3434 after placing a high of $1.3463 and a low of $1.3414. Yesterday, the GBP/USD pair rose to its highest since 22nd November but failed to remain there and started falling to post-daily losses amid the strength of the US dollar.
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Weaker US dollar continues to underpin GBP/USD
The US dollar posted heavy daily gains in a week and moved above 96.20 amid the unclear moves surrounding the US Treasury Yields and equities. The markets from Britain were not offering any macro-economic data release, which left the pair to keep following the tracks of the US dollar.
Meanwhile, the British Pound was also under pressure due to developments surrounding the Omicron variant and the Brexit deal. The Brexit fears continued weighing on the GBP despite the European Union and the UK agreeing over fishing quotas for 2022.
Vice President Maros Sefcovic pressures GBP/USD
The latest comments from European Commission Vice President Maros Sefcovic added to the pressure on GBP. He said that “British decision to activate Article 16 of the Northern Ireland Protocol would have serious consequences for Northern Ireland’s economy, endanger peace in the region ad constitute an enormous setback for EU-UK relations.” The EU diplomat disliking the UK’s threat to use Article 16 further negatively impacted GBP and dragged GBP/USD to the downside.
Omicron variant COVID-19 continues to impact the UK
The rising number of coronavirus cases in the UK due to the rapid spread of the Omicron variant also weighed on the British Pound. On Tuesday, Britain reported a record-high number of coronavirus cases with 129,471 confirmed cases. Despite the increased number of cases, PM Boris Johnson said that he would not impose new restrictions this year to limit the spread of highly transmissible Omicron variants. These comments from Johnson at the time of rising infections in the country weighed on the Sterling and added negative pressure on GBP/USD currency pair.
On the other hand, the greenback enjoyed gains due to its status as a safe-haven currency. The increased fears of a rapid surge of coronavirus cases worldwide added to the risk-off market sentiment. According to the latest studies, the Omicron variant was 70% more transmissible than other variants of the coronavirus, and this news turned down the risk-appetite from the market and pushed safe-haven currencies like USD. the US Dollar Index also rose to 96.23 level and added in the strength of the greenback which dragged GBP/USD further to the downside.
On the data front, there was no macroeconomic data released from Britain but the US; at 19:00 GMT, the HPI from October improved to 1.1% against the estimated 0.9% and supported the US dollar. The S&P/CS Composite-20 HPI fell to 18.4% against the expected 18.6% and weighed the US dollar. At 20:00 GMT, the Richmond Manufacturing Index advanced to 16 against the predicted 11 and supported the US dollar. The strong US dollar weighed heavily on GBP/USD on Tuesday.
GBP/USD price forecast – Daily technical levels
Support Resistance
1.3411 1.3460
1.3389 1.3485
1.3363 1.3508
Pivot Point: 1.3437
GBP/USD price forecast- 38.2% Fibonacci Retracement in Play
The GBP/USD traded bullish to reach the 1.3423 level. However, the closing of candles under the 1.3465 resistance signals the chances of a bearish correction. The GBP/USD pair surged on Tuesday to retest the 1.3465 resistance level but failed to cross it. As a result, the closing candle below 1.3465 initiated a sell-off in Sterling. On the 2-hour timeframe, the GBP/USD has closed neutral candles like Shooting Star and Doji, indicating a weakness in the bullish bias.
In addition, the RSI has begun to move out of the overbought zone, indicating the possibility of a pullback. As a result, the GBP/USD pair can plunge to 1.3387 (23.6 percent Fibonacci level), and a break below this exposes the pair to the 1.333 level. A Fibonacci correction level of 38.2 percent is extending that level. A spike in selling pressure might push GBP/USD towards the 1.3180 level, which is supported by a Fibonacci retracement of 61.8 percent.
In contrast, a surge in bullish pressure, particularly over 1.3380, can cause a retracement to 1.3435 and 1.3504. Leading technical indicators, such as the RSI and Stochastic RSI, are above 50, indicating a bullish trend. Furthermore, an uptrend is supported by the 50-day EMA (exponential moving average). As a result, a surge in demand at the current market level might push the GBP/USD to 1.3440. A break over the 1.3460 level might initiate a new rise till the 1.3504 level. 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!
