- The discovery of a new variant of COVID-19 in South Africa that may be more difficult to combat has boosted the mood of the risky market.
- The pound fell on the new variant of COVID-19 but ended the day in the green, up 0.09%.
- GBP / USD upward movement caused by the weakness of the US dollar.
The pound is recovering from earlier losses during the day, despite sentiment of market risk that is clouding financial markets due to the discovery of a new variant of COVID-19 in South Africa. As of this writing, GBP / USD is trading at 1.3341, up 0.14%.
During the overnight session, market sentiment cooled as South Africa announced the discovery of a new variant of COVID-19.
The World Health Organization (WHO) said it was a variant of the worry, posing a threat that could thwart countries’ efforts to slow the spread of COVID-19. According to sources cited by CNBC, “that the variant contains a” unique constellation “of more than 30 mutations in the spike protein, the component of the virus that binds to cells. This is significantly more than those of the delta variant.
Mutations found on the B.1.1.529 COVID-19 variant called omicron are linked to antibody resistance, affecting the virus’s behavior regarding vaccines, treatments, and transmissibility. According to Tulio de Oliveira, a scientist in South Africa, cited by CNBC, said the variant contains around 50 mutations.
Putting the COVID-19 theme aside, the latest Brexit development could weaken the GBP. UK Brexit Minister David Frost said on Friday that “although we are still keen to find a negotiated solution with the EU on the Northern Ireland Protocol, the gap between our positions is significant and we are ready to use article 16 “. At the same time, his counterpart Maros Sefcovic said that “a decisive push was needed to ensure predictability” in the case of drug supply.
Returning to GBP / USD, during the overnight session, the pair remained subdued, despite the risk aversion mode that weakened most risk-sensitive currencies, relative to its safe haven peers, to except the US dollar. The British pound plunged to the S2 daily pivot point at 1.3272 as news of the coronavirus crossed wires but rebounded, recovering the figure of 1.3300.
That said, GBP / USD traders should focus on developments in Brexit, the Bank of England and the new variant of the coronavirus. GBP / USD bulls held firm on Friday; however, developments in the coronavirus over the weekend could worsen market mood conditions that could favor USD bulls.
GBP / USD Price Prediction: Technical Outlook
The GBP / USD pair continues to trade in a descending channel about 350 pips wide. The decline seen during the risk aversion session briefly touched the low trendline of the above. However, he rejected the move lower, forming a candle chart called a “hammer” in the daily chart, indicating that the bulls are regaining control in the short term. Nonetheless, the daily moving averages (DMA) with a downward slope are above the spot price, reinforcing the downward trend.
Following an upward corrective move, low support turned November 12 resistance at 1.3352 would be the first resistance. A break out of this level would expose crucial areas of resistance, such as the September 29 cycle low support holding resistance at 1.3411, followed by the November 18 high at 1.3513.
On the other hand, the psychological 1.3300 would be the first support which, when broken, could pave the way for further losses, finding key support levels on its downside. The next support would be the November 26 low at 1.3278, followed by the figure at 1.3200.