GBP/USD slips back under 1.3500 in holiday-thinned trading conditions, set to end month with decent gains


  • GBP/USD has sliped back under 1.3500 but remains close to monthly highs amid choppy, holiday-thinned trading conditions.
  • Following a BoE hike and improvement in Omicron-related sentiment, the pair is on course for a 1.4% monthly gain.

In thin trading conditions on the final day of 2021, GBP/USD is choppy and recently slipped back under the 1.3500 handle. Trading conditions are subdued with many European markets closed for the day and markets in the UK and France shutting early. Though the pair is down about 0.15% on the day as its trades in the 1.3475 area, it only trades about 0.4% below monthly highs hit earlier this week in the 1.3520s. Following a surprise (to some) 15bps rate hike from the BoE midway through the month coupled with a substantial improvement in the market’s appetite for risk as perceived risks to the global economy from the spread of Omicron subside, GBP/USD is on course to post a 1.4% gain on the month.

However, if the GBP/USD closes out the year at current levels, that would mean an annual loss of slightly more than 1.0%. Despite one of the strongest growth rates in the G10 in 2021 for the UK economy and a comparatively hawkish BoE, GBP has been unable to resist the advances of the US dollar, which has powered higher throughout the year as surging US inflation brought forward expectations for Fed policy normalisation. Indeed, some market participants are betting that the bank might immediately commence rate hikes right after the bank’s QE programme ends in March 2022.

Looking at the pair on a shorter time horizon, the fact that GBP/USD ran into resistance just above 1.3500 and failed to push above this level suggests that, for now, further gains may have to wait until the new year. The fact that the pair was able to clear its 50-day moving average with ease earlier in the week suggests that the short-term technical momentum is looking good. As long as the UK economy doesn’t face too much disruption from the spread of Omicron, thus keeping the BoE on course for another rate hike in February, the short-term fundamentals look positive for GBP as well. News on Friday that the UK’s drug regulatory had approved Pfizer’s highly effective at-home Covid-19 treatment pill Paxlovid may further support this positive narrative.

But some FX strategists think that the US dollar, which has pulled back sharply from earlier monthly highs despite continued evidence of elevated inflation, a hot labour market, strong growth conditions and a hawkishly shifting Fed, is overdue a short-term rebound. Perhaps further strong data in the form of next week’s US December labour market reports and December ISM PMI surveys could provide the catalyst for such a rebound. Key levels of support to keep an eye on if the bearish scenario unfolds would be in the 1.3375 area and then the 2021 lows in the 1.3160s.

GBP/Usd

Overview
Today last price 1.3486
Today Daily Change -0.0010
Today Daily Change % -0.07
Today daily open 1.3496
 
Trends
Daily SMA20 1.3312
Daily SMA50 1.3425
Daily SMA100 1.357
Daily SMA200 1.3748
 
Levels
Previous Daily High 1.3522
Previous Daily Low 1.3454
Previous Weekly High 1.3438
Previous Weekly Low 1.3174
Previous Monthly High 1.3698
Previous Monthly Low 1.3194
Daily Fibonacci 38.2% 1.3496
Daily Fibonacci 61.8% 1.348
Daily Pivot Point S1 1.346
Daily Pivot Point S2 1.3423
Daily Pivot Point S3 1.3392
Daily Pivot Point R1 1.3527
Daily Pivot Point R2 1.3558
Daily Pivot Point R3 1.3595

 

 

Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer. Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. Risk Disclosure: Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.

Feed news Join Telegram

Recommended content


Recommended content

Editors’ Picks

AUD/USD eyes more weakness despite higher-than-expected monthly Retail Sales data

AUD/USD eyes more weakness despite higher-than-expected monthly Retail Sales data

The AUD/USD pair is expected to slip down to near 0.6400 despite the release of the lower-than-expected monthly Retail Sales data. The economic data has landed at 0.6%, higher than the estimates of 0.4%, but lower than the prior release of 1.3%.

AUD/USD News

EUR/USD renews 22-year low as yields propel DXY, focus on ECB vs. Fed drama, energy crisis

EUR/USD renews 22-year low as yields propel DXY, focus on ECB vs. Fed drama, energy crisis

EUR/USD takes offers to refresh multi-year low during seven-day downtrend. US Treasury yields rally to fresh cycle highs amid fears of economic slowdown, hawkish central banks. Energy crisis in Eurozone joins fears of more drama on the Russia-Ukraine issue to keep bears hopeful.

EUR/USD News

Gold turns sideways around $1,630 as investors await Fed Powell’s speech

Gold turns sideways around $1,630 as investors await Fed Powell’s speech

Gold price is displaying a dull performance as investors have sidelined ahead of the speech from Fed chair Jerome Powell. The precious metal is juggling around $1,630.00 after a modest decline from the critical hurdle of $1,640.00.

Gold News

Binance Coin price could shed more than 10% if this trend continues

Binance Coin price could shed more than 10% if this trend continues

Binance Coin price has been on a downtrend for quite some time and has intensified after the recent sell-off in Bitcoin price. Investors need to pay close attention to the BNB’s moves over the last three weeks, which revealed a bearish setup.

Read more

Lower gas prices and favorable views of labor market again boost confidence

Lower gas prices and favorable views of labor market again boost confidence

The Consumer Confidence Index rose to its highest level since April, and now sits more than 12 points higher than where it was just two months ago. Falling gasoline prices and a still-tight labor market are the main reasons we have seen a recent rebound in confidence.

Read more

Forex MAJORS

Cryptocurrencies

Signatures