GBP/USD Slice Through 1.3500, Bulls in Action Despite Holiday Season
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- The British pound found strength due to the government’s active response and medical studies, taming fears of the virus variant.
- The US dollar came under pressure after the optimism related to the micron variant started to spread in the market.
- GBP/USD traded bullish to reach above the 1.3500 level, but the closing of candles above the 1.3510 resistance signals the chances of uptrend continuation.
The direct currency pair GBP/USD closed at $1.3530 after setting a high of $1.3551 and a low of $1.3465. The direct currency pair GBP/USD extended its bullish rally for the third session in a row, peaking on November 10th. This December, the pair ended with gains as it remained green for four successive weeks.
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COVID-19 fears – Surge of the Omicron in focus
Despite the rapid spread of the Omicron variant and the rising number of coronavirus cases in the United Kingdom, the British pound found strength due to the government’s active response and medical studies, taming fears of the virus variant. Furthermore, the struggling US dollar also helped GBP/USD remain green for a whole month.
After the UK reported 189,213 cases in a single day, the so-called temporary medical housing facility was introduced under the name “surge hubs” by Britain’s National Health Service. The need to introduce surge hubs across the country came after hospitals reached their capacity to treat patients. The active participation of the government in fighting the rising number of coronavirus cases amid the Omicron spread added some support to the Sterling and pushed the GBP/USD higher.
Furthermore, reports this week indicate that the Omicron variant, despite being the highly contagious variant of coronavirus, may cause fewer severe infections than the Delta variant, alleviating some market concerns. The market’s risk appetite was restored as a result of the optimism, and riskier currencies such as the Sterling were supported, pushing the GBP/USD even higher.
A quick economic events outlook
On the data front, this week, there was only the Nationwide HPI report released from Britain, which surged to 1.0% against the forecasted 0.5% and added further strength to the British Pound. The US Goods Trade Balance and Pending Home Sales reports remained unfavorable for the dollar this week from the US side. However, the unemployment claims from last week dropped to 198K, which provided some support to the US dollar. Other than this, most of the reports issued from the US side had little to no impact on the dollar.
The US dollar came under pressure after the optimism related to the micron variant started to spread in the market. The dollar lost its safe-haven appeal and turned red, which ultimately helped GBP/USD remain high. Meanwhile, while ending in 2021 and entering into 2022, the US dollar was also under pressure as the Federal Reserve prepared for a rate hike in 2022.
What’s next?
In the upcoming week, many essential reports are to be released from the US side, including:
- ISM Manufacturing PMI
- JOLTS Job Opening
- ADP Non-Farm Employment Change
- FOMC Meeting Minutes
- ISM Services PMI
- Average Hourly Earnings
- Non-Farm Employment Change
- Unemployment Rate
It looks like next week will be crucial for the greenback, which could move GBP/USD to either side depending on the reports issued. At the same time, UK banks will remain closed on Monday for New Year’s Day.
Except for Christmas and New Year’s Day, most Forex brokers are open on all holidays. Holiday schedules for stock exchanges and banks vary slightly. Banks handle the majority of foreign currency volume. When they are closed, the market becomes less liquid, and speculators get a stronger hold on the market. This can result in unusually low or unusually high volatility.
Daily Technical Levels
Support Resistance
1.3458 1.3526
1.3421 1.3559
1.3389 1.3595
Pivot Point: 1.3490
GBP/USD slice through 1.3500 resistance – Uptrend to continue
The GBP/USD traded bullish to reach above the 1.3500 level, but the closing of candles above the 1.3510 resistance signals the chances of uptrend continuation. The GBP/USD pair surged on Friday and closed near 1.3532, right above the resistance that became a support level of 1.3510. The pair has formed a bullish engulfing candle on the 4-hourly timeframe, supporting solid bullish sentiment among investors.
The GBP/USD pair may find immediate resistance at 1.3559 or 1.3595 levels on the bullish side. Taking a look at the leading technical indicator such as the RSI, it’s holding near 70, indicating solid uptrends in the GBP/USD pair. At the same time, GBP/USD retests and closes above the 1.3454 support zone, which is extended by an upward trendline. Thus, the odds of an upward movement remain solid.
Alternatively, a break below the 1.3454 support level could allow further room for selling until the 1.3384 and 1.3324 support levels are reached. Good luck, and stay tuned for more updates!
