GBP/USD is reversing gains in the European session, headed toward 1.3250, as mounting instances of the novel Omicron COVID strain in the UK overshadows broader market optimism.
It is the Pound that is bearing the brunt of the unabated increase in new cases, with 336 known instances of the highly-mutated form across the United Kingdom on Monday, an increase of 90 cases from the previous day.
The Health Secretary of the United Kingdom, Sajid Javid, stated that community dissemination of the Omicron coronavirus strain has been observed in numerous parts of England.
As a result, Cable traders have been unable to profit from the prevailing risk-on mentality, which has been fueled by Chinese stimulus initiatives and the lessening of concerns about the new COVID strain around the world.
Furthermore, the markets have missed the latest good advances on the Brexit front, as well as the promising comments from GlaxoSmithKline, a UK-based pharmaceutical company.
The positive signal released only last week, according to the pharmaceutical giant, underscored the relevance of Sotrovimab for the early treatment of COVID-19, and the data was constructed on that foundation.
According to The Telegraph, the United Kingdom is poised to extend an olive branch to France to resolve the ongoing fishing dispute as part of the latest Brexit update.
According to British sources, a deal on “replacement boats” might be struck, which would allow for the issuance of additional licenses to EU vessels in the future.
In the next few weeks, the Omicron statistics from the United Kingdom will be intensively scrutinized in light of a data-dry calendar. The movements of the yield curve and the value of the Dollar might potentially influence the major.
GBP/USD Technical Outlook
GBP/USD CHART Source: Tradingview.com
Taking a technical perspective, the resurgence of selling at higher levels confirms the bearish break of a short-term declining channel that has been in place since July.
It follows that the current gradual decline from the 1.3830–35 zone, which was reached in October, is likely to be extended in the future. As a result, a future retest of sub-1.3200 levels, or the YTD low recorded last week, remains a definite possibility in the near term.
After that, some follow-through dumping should open the way for a decline towards the next significant support in the 1.3125 area, on its way to the 1.3100 level and the 1.3050-45 zone.
On the other hand, the zone between 1.3290 and 1.3300 may continue to operate as initial strong resistance. Some short-covering moves and an acceleration of the rebound into the 1.3340-50 supply zone might result from persistent strength beyond this level of support.
Next comes resistance at the 1.3370 and 1.3400 levels, which are both in the 1.3400 range. The latter should operate as a significant resistance level, and if it is breached strongly, it would indicate that the pair has built a near-term base and that the bearish view has been dispelled.