With new bids coming into effect during the early European session, the GBP/USD pair surged to an all-time daily high in the previous hour, hovering near the 1.3245-50 zone.
Although it had shown some resistance below the 1.3200 level on Monday, the GBP/USD pair saw new buying on Tuesday, snapping a two-day losing skid that had lasted two days.
A reversal in risk attitude, as seen by a generally optimistic tone in the equity markets, has damaged the safe-haven status of the US Dollar in recent weeks.
This, in effect, was seen as a critical component in providing a minor boost to the major’s stock price.
Major Market Moving Factors
The deteriorating COVID-19 scenario, on the other hand, may discourage traders from putting strong bullish wagers on the British Pound.
As a result, the United Kingdom has recorded a record number of cases, with 12 individuals dying as a result of the novel Omicron form of the coronavirus.
To make matters worse, the United Kingdom’s Deputy Prime Minister, Dominic Raab, has refused to rule out the possibility of strengthening social regulations before Christmas.
As a result, investors should be cautious about the quick spread of the novel strain, as well as the possibility that President Joe Biden’s big $1.75 trillion spending package will be dealt a deadly blow.
The Fed’s hawkish perspective, as well as an increase in the yield on US Treasury bonds, could operate as a tailwind for the Dollar, limiting the gains made by the GBP/USD pair in the meantime.
Furthermore, investors may be hesitant to make aggressive wagers due to the relatively tight liquidity conditions that exist as the end-of-year holiday season approaches.
Due to the lack of important market-moving economic announcements from either the United Kingdom or the United States, it is prudent to exercise caution while preparing for any further appreciating rise in the GBP/USD pair.
An Examination Of The Technical Aspects
GBP/USD CHART Source: Tradingview.com
Despite the fact that the Relative Strength Index (RSI) signal on the four-hour chart climbed over 50 in the early hours of Tuesday, the Pound/Dollar continues to trade underneath the 100-period simple moving average (SMA), which is now at 1.1360.
If the pair manages to break through that level and establishes it as support, the next upward objective is 1.3300 (the psychological level), followed by 1.3340 (the resistance level) (200-period SMA).
On the other hand, the 50-period SMA provides dynamic stability at 1.3240, just in front of 1.3200 (psychological threshold) and the 1.3170/1.3160 region (static levels).