GBP/USD Forecast: Pound closes in on key support on Omicron fears
- GBP/USD has started to edge lower after the UK raised the COVID threat level.
- Dollar gathers strength at the start of the week.
- GBP/USD could suffer additional losses below 1.3200/1.3190 support area.
After rising toward 1.3300 ahead of the weekend, GBP/USD has failed to preserve its bullish momentum on Monday with the latest coronavirus headlines from the UK weighing on the British pound. In case buyers fail to defend the support area that seems to have formed around 1.3200, the pair could extend its slide in the near term.
On Sunday, British Prime Minister Boris Johnson warned that two doses of vaccine would not be enough against the Omicron "tidal wave" that the UK was facing. Additionally, the UK has raised the COVID threat to 'Level 4', one below the maximum.
Meanwhile, Health Secretary Sajid Javid said that the Omicron variant was spreading at a "phenomenal rate" in England but noted that they had not yet confirmed any Omicron-related deaths.
GBP/USD could find it difficult to regain its traction with investors assessing the potential impact of the Omicron variant on the Bank of England's (BoE) policy decisions, which will be announced later in the week.
On the other hand, the broad-based dollar strength, as reflected by the 0.25% gain seen in the US Dollar Index, is putting additional weight on the pair's shoulders. There won't be any high-tier data releases featured in the US economic docket. Later in the day, the BoE will publish the minutes of the Financial Policy Committee meeting.
GBP/USD Technical Analysis
GBP/USD is trading below the 50-period SMA on the four-hour chart and the Relative Strength Index (RSI) indicator has declined below 50, suggesting that buyers show no interest in the pound for the time being.
On the downside, 1.3220 (20-period SMA) aligns as initial support before the 1.3200/1.3190 area (static level, psychological level). In case a four-hour candle closes below the latter, the pair could extend its slide toward 1.3160 (December 8 low).
Resistances are located at 1.3250 (50-period SMA), 1.3280 (static level) and 1.3300 (psychological level, 100-period SMA).
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
