Bearish View
Sell the GBP/USD and add a take-profit at 1.3100.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.3300 and a take-profit at 1.3400.
Add a stop-loss at 1.3250.
The GBP/USD pair was under pressure during the American and Asian sessions as concerns about the new Omicron variant rose. The pair tilted lower and dropped to 1.3200, which was the lowest level since December 7th 2020.
Omicron Worries
The biggest concern for the GBP/USD is that the number of Omicron cases has risen in the United Kingdom in the past few days. Scientists are worried that the situation will get worse because of how quickly the variant is spreading.
Also, scientists at Moderna and Pfizer have warned that the new strain is significantly different from the previous one. As such, there are concerns about whether the existing vaccines will be able to deal with it.
In an interview with the Financial Times, the Chief Executive of Moderna warned that it could take a few months to develop a vaccine that works.
Therefore, the new variant could interrupt the UK and US recovery. For one, it could disrupt the ongoing labour market. In the past few months, the two countries have seen their unemployment rates decline substantially.
Another risk is that it could disrupt supply chains as more people working in ports and truck drivers fall ill. This, in turn, will likely see inflation keep rising. Recent data showed that US inflation has risen to the highest level in more than 30 years. The UK inflation has also risen to the highest point in more than a decade.
The top movers for the GBP/USD pair will be the latest home price index (HPI) data by Nationwide. Analysts expect the data to show that home prices rose by 9.3% in November as demand outpaced supply. Markit will also publish the latest UK and US manufacturing PMI data. Economists expect these numbers to show that the PMI in the two countries rose.
GBP/USD Forecast
The GBP/USD pair crashed hard after Jerome Powell hinted that the Fed will increase the size of its asset purchases at the December meeting. The pair dropped to 1.3200, which was about 1% below the highest level this week.
The pair managed to drop below the 25-day and 50-day moving averages while the MACD moved below the neutral line. The pair is below the dots of the Parabolic SAR indicator. Therefore, the pair will likely keep falling as bears target the key support at 1.3100.
