GBP/USD Forecast: UK’s lockdown hits the pound

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3554

UK Prime Minister Boris Johnson announced fresh restrictions starting mid-night.
Manufacturing output kept improving in the UK, according to Markit.
GBP/USD at risk of accelerating its decline once below 1.3515.

The GBP/USD pair peaked at 1.3702 this Monday, its highest in over two years, but plummeted over 150 pips from such a high to settle near a daily low of 1.3541. Risk-appetite led the way at the weekly opening, but it quickly faded on coronavirus-related news. The latest on the issue came from Prime Minister Boris Johnson who announced a total lockdown starting mid-night. Concerns mounted after Professor of Medicine at Oxford University John Bell said that there are questions about vaccines’ effectiveness on the new South African strain, amid substantial changes in the structure of the virus’ spike protein.

The UK December Markit Manufacturing PMI resulted at 57.5, better than anticipated. The UK also published November November Mortgage Approvals, which improved to 104.969K. The country also reported 58,784 new coronavirus infections, a record high. The UK won’t publish relevant macroeconomic data this Tuesday.

GBP/USD short-term technical outlook

The GBP/USD pair is poised to extend its decline, according to intraday technical readings. In the 4-hour chart, technical indicators retreated from overbought readings to fell into negative levels, although the bearish momentum eased. In the mentioned chart, the pair has fallen below its 20 SMA, which currently stands at 1.3605, providing dynamic resistance. The bearish case could accelerate on a break below the 1.3515, the immediate support level.

Support levels: 1.3515 1.3470 1.3420

Resistance levels: 1.3605 1.3660 1.3710

View Live Chart for the GBP/USD

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Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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