GBP/USD erases some of Friday’s gains hovers around 1.3220s

The GBP/USD pares some of its last Friday’s gains, slide some 0.32%, trading at 1.3226 during the New York session at the time of writing. Investors’ mood is downbeat, as portrayed by European equities ending in the red, while major US stock indexes are losing between 0.65% and 0.85%.

Factors like the first death linked to the omicron variant in the UK dented the market mood amid its fast global spread. In response to increasing COVID-19 cases in the country, Borish Johnson, PM, raised the COVID alert to four. That, alongside the Federal Reserve and Bank of England’s last monetary policy meetings in the year, keep GBP/USD traders at bay, waiting for more clues.

Since the overnight session, the British pound has failed to capitalize a move towards 1.3300, courtesy of increased demand for the greenback. Further, the Fed’s “hawkish” pivot for the last two weeks keeps USD in charge against most G8 currencies, with the US Dollar Index rising 0.16%, sitting at 96.25, a headwind for sterling, which retreated from 1.3270s down to 1.3220s.

US bond yields from mid to longer-term maturities in the bond market are plunging between 7 to 8 basis points. The 10-year Treasury yield, a barometer for interest rates, is down seven basis points, at 1.419%, while the 20s and 30s are down to 1.85% and 1.80%, respectively.

The absent UK and US economic docket left GBP/USD traders leaning on the dynamics of market sentiment and US dollar macroeconomic data. However, on Wednesday, the UK would report the Consumer Price Index. On the US front, the Federal Open Market Committee will unveil its monetary policy. The market expects an increase in the bond taper, at least by double of the original $15 billion amount of reducing purchases.

GBP/USD Price Forecast: Technical outlook

The GBP/USD 1-hour chart depicts the pair is neutral, though mild-bearish, as it has failed to sustain a clear break above the 200-hour simple moving average (SMA), 14-days before, which at press time lies at 1.3251. Also, GBP bears reclaimed the 50-hour SMA and threaten to break below the 100-hour SMA at 1.3227.

In the event of breaking the abovementioned level, the first support would be the S1 daily pivot around the 1.3200-08 range. A breach of the latter would expose the December 10 low at 1.3287, followed by the December 8 cycle low at 1.3160.

On the flip side, the first resistance is the 200-hour SMA at 1.3251. A break above that resistance would open the door for further gains, with the December 10 high at 1.3275. The breach of the latter would send the pair rallying towards 1.3300.