Bearish View
Sell the GBP/USD and set a take-profit at 1.3100.
Add a stop-loss at 1.3300.
Timeline: 1-2 days.
Bullish View
Set a buy-stop at 1.3250 and a take-profit at 1.3325.
Add a stop-loss at 1.3150.
The GBP/USD pair was in a tight range as investors assess the rising number of Covid-19 cases in the UK and the US. The pair is trading at 1.3225, which is a few points above Monday’s low of 1.3175.
UK and US Covid Cases
The GBP/USD pair retreated last week as investors reacted to the interest rate decisions by the Bank of England (BOE) and the Federal Reserve. The two banks sounded hawkish, with the BOE surprising investors with a 25 basis points rate hike. The Fed hinted that it will implement three rate hikes in 2022 and end the quantitative easing in March.
This week, focus is solidly on the Omicron and Delta variants that are spreading rapidly globally. In the UK, recent numbers showed that the country had more than 80,000 new infections on Sunday even after the government unveiled Plan B restrictions last week.
Therefore, there are concerns that the government will intensify restrictions in the coming weeks. According to the Telegraph, a source at the prime minister said that the government will likely step-2 restrictions after Christmas. These restrictions will lead to the closure of non-essential businesses in the country.
As such, there is a likelihood that the country’s economy will slow down in the coming quarters. Indeed, in a statement, the head of one of the biggest restaurant chains in the UK warned that the sector could collapse if the government goes on with the lockdown threat.
Meanwhile, in the United States, analysts are watching the Build Back Better (BBB) deal that appears to be failing in the Senate. On Sunday, Senator Joe Manchin said that he will not vote for the $2.2 trillion deal. Without his vote, the bill will be unlikely to pass considering that the Senate is divided 50-50.
GBP/USD Forecast
The GBP/USD pair is trading at 1.3225, which is a few points above the lowest level on Monday. On the four-hour chart, the pair is a few points below the standard pivot point. The pair is slightly below the 25-day moving average while the Relative Strength Index (RSI) has been in a bearish trend.
It is also slightly above the important support level at 1.3195, which was the lowest level on November 30th. Therefore, the pair will likely have a bearish breakout as bears eye the key support at 1.3100.
