GBP/USD: Bears eager for a covid trigger to move in towards 1.3200

GBP/USD, which has been tugged and pulled over recent weeks between central bank themes, now faces the risk of a covid contagion risk for the foreseeable future since the latest coronavirus threat. For the open, the bias leans to the downside considering the latest sell-off in the greenback and weekend reports that Omicron has breached the shores of the UK.

On Friday, GBP/USD's show of the upside was sold off sharply in the final hour of play, meeting an hourly level of support. Traders will be looking to see if this area, in the mid 1.33's, will hold up considering the implications that the sudden dilemma that the Bank of England will now need to juggle with regards to Omicron.

''Concerns it might be harder to combat the new variant found in southern Africa with vaccines also prompted investors to scale back their expectations for a Bank of England (BoE) interest rate rise in December, adding to downward pressure on the pound,'' Reuters reported.

The week ahead holds little domestically in terms of the pound, but market sentiment has been rocked and shifted towards the covid theme and US Nonfarm Payrolls, while critical, could take a back seat. The divergence between the Bank of England and the Federal Reserve has been a key driver and would normally be the catalyst. However, covid risks move into the driving seat for the open as the UK and EU cases spark fresh containment measures.

GBP/USD technical analysis 

From a technical perspective, the price still has room to move higher in the correction towards the 38.2% Fibo but at this juncture, it's already moved in on the old support. The lower time frames, such as the 4-hour chart will be monitored for bearish conditions and bearish structure to firm for the open. 1.3320 in this regard is compelling considering the prior highs and the W-formation's neckline that meets a 50% reversion: