Bullish View
Buy the GBP/USD pair and add a take-profit at 1.3500.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bearish View
Set a sell-stop at 1.3350 and a take-profit at 1.3300.
Add a stop-loss at 1.3400.
The GBP/USD price has been in a tight range in the past few days as investors focus on the ongoing Omicron pandemic. The pair is trading at 1.3393, which is a few pips below last week’s high of 1.3435.
Omicron Risks Ease
The GBP/USD pair has been in a bullish trend as investors price in a more hawkish Bank of England (BOE) as the number of Covid-19 cases rise in the UK.
Recent data from the UK and the US show that the number of new infections is rapidly rising. For example, the US recorded more than 200k cases on Christmas day. The UK has also been recording a strong increase in the number of Covid-19 cases.
However, on a positive sign, the number of deaths has increased just slightly. This is in line with recent reports from South Africa and the UK. Two reports published this month showed that the Omicron variant is relatively less fatal than the other variants. Its symptoms are also significantly mild than those of the other variants.
Therefore, the GBP/USD has risen because investors expect that the Bank of England (BOE) will be more hawkish than the Federal Reserve in the coming months. The bank has already become the first central bank in the G7 to hike interest rates. The Fed has hinted that rate hikes will start in the coming year.
Activity in the GBP/USD will be relatively muted later today as most investors stay away from the market. That’s because most of them have taken the Christmas holidays as they prepare for the upcoming year. Still, the low-volume environment could lead to more volatility in the pair.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD has been in a bullish trend in the past few days. The pair has rallied from a monthly low of 1.3160 to 1.3435. On the four-hour chart, the pair has moved above the 25-day and 50-day moving averages.
It has also risen above the 38.2% Fibonacci retracement level. Also, the pair has moved above the upper side of the cup and handle pattern at 1.3376 and formed a small bullish flag pattern.
Therefore, there is a likelihood that the pair will keep rising as bulls target the key resistance at 1.3500. This view will be invalidated if the price drops below 1.3340.
