• GBP/USD stays under bearish pressure since failing to rise above key resistance.
  • 1.3160 aligns as next target on the downside.
  • UK doesn't rule out additional restrictions heading into the holidays.

GBP/USD has dropped sharply on Friday and extended its slide early Monday as the pound remains on the back foot amid renewed concerns over the coronavirus Omicron variant weighing on the economic activity. The pair is currently trading below 1.3200 and shows no signs of a recovery.

On the week ending December 19, more than 140,000 cases of coronavirus got reported in London. British Deputy Prime Minister Dominic Raab noted that there were currently 104 patients in hospitals with the new Omicron variant and 12 fatalities. 

Several news outlets reported that government scientists were concerned that the healthcare system in the UK would be overwhelmed if additional restriction measures were not introduced before the Christmas holiday. 

In the absence of high-impact data releases, market participants will keep a close eye on fresh coronavirus-related developments. Markets remain risk-averse at the start of the week, making it difficult for the British pound to find demand. The UK's FTSE 100 Index is down more than 2% and the S&P Futures are losing 1.8%.

On the other hand, the greenback is staying relatively resilient against its rivals early Monday despite the fact that the 10-year US Treasury bond yield is losing more than 2% below 1.4%. Another selloff in US stocks could provide a boost to the dollar in the second half of the day and allow the bearish pressure surrounding GBP/USD to remain intact.

GBP/USD Technical Analysis

On the downside, the next static support is located at 1.3160. The Relative Strength Index (RSI) indicator on the four-hour chart is still above 30, suggesting that there is more room on the downside before the pair becomes technically oversold.

In case 1.3160 turns into resistance, additional losses toward 1.3135 (December 11, 2020, low) and 1.3100 (psychological level) could be witnessed.

On the flip side, 1.3240 (20-period SMA) aligns as the first hurdle ahead of 13260 (50-period SMA, 100-period SMA) and 1.3300 (psychological level).

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