The British pound currency has started to recover against the US dollar as COVID-19 Omicron fears start to subside, which is prompting global equity markets to recovery off the lows of the week.
Additionally, US President Biden said, “I think there is still a possibility that his Build Back Better agenda can get done, despite Sen. Joe Manchin’s opposition of the climate and social spending bill.”
Further bullish for sterling and risk sentiment is PM Boris Johnson’s comment on ruling out any tougher lockdown measures ahead of Christmas. However, tougher lockdowns could happen in 2022.
Also, Health Secretary Sajid Javid mentioned this week that a reduction in the virus-linked self-isolation period which is a minor relief to businesses hurt by the Omicron. To a larger extent, the BoE also hiked rates last week.
With the mentioned positive happening the GBPUSD pair has further scope to rise on the foreign exchange market, with the 1.3300 level the natural upside target. Bulls ideally need to breach the 1.3380 area.
Looking at sentiment, the ActivTrader Market Sentiment tool shows that traders are currently still positive towards sterling, despite the rally of the lows of the weak and the uncertainty towards more lockdowns.
The current reading shows that sentiment is at 71 percent and has increased since last week, however, this bullish sentiment skew could mean that GBPUSD pair is due to drop, so buying sterling is still very risky.
GBPUSD Short-term Technical Analysis
Looking at the four-hour time frame, technical analysis shows few reasons to be bullish towards sterling as the pair trades close to the neckline of a large head and shoulders pattern.
Traders should note that bulls need to rally the GBPUSD pair above the 1.3400 resistance zone to officially invalidate the mentioned bearish price pattern on the lower time frames.
See real-time quotes provided by our partner.
GBPUSD Medium-term Technical Analysis
According to the daily time frame, the GBPUSD pair has formed a large head and shoulders pattern, which is still approaching its downside target.
The GBPUSD pair is also trading inside a large falling price channel. The pattern is typically bullish. So a move away from the 1.3200 to 1.3400 level is likely to prompt a looming and explosive breakout.
See real-time quotes provided by our partner.
