GBP/USD Forecast: Trying to Stop the Bleeding

Mahmoud Abdallah

The GBP/USD pair's attempts to recover, which did not exceed the 1.3370 resistance level, evaporated. The pair collapsed to the 1.3194 support level, the lowest of a year, after the Federal Reserve Chairman warned that raising the US interest rate may come sooner than expected. The currency pair is stable around the 1.3325 level as of this writing. Jerome Powell's comments added pressure on the currency pair, which is suffering mainly from fears that the COVID variant could halt the BOE's tightening path.

Yesterday, US Federal Reserve Chairman Jerome Powell said it would be "reasonable to consider ending tapering a few months in advance" if concerns about the Omicron variable prove to be overblown.

Some unhelpful comments made by the president of Moderna led to another drop in the market and the US dollar was among the losers. The euro, the franc, the yen and the pound were all trading higher on Tuesday, November 30 after Stefan Bancel, president of Moderna, said he expected a "material decline" in the effectiveness of current vaccines. "There is no world, I think, where is the same level ... we had with Delta," Bancel told the Financial Times in an interview at the company's headquarters in Cambridge, Massachusetts.

Oil and stock markets were all sharply lower after the comments, betraying investor fears that the pandemic was far from over, and with inflation already soaring, there might be little central banks could do to provide generous support. And the dollar - often described as a "safe haven" - was unable to benefit from the flight to risk, a sign that investors are backing away from expectations of a rate hike by the Federal Reserve.

Regarding the effectiveness of current vaccines, Bancel said he believes "it will be a substantial decline. I don't know the quantity because we need to wait for the data. But all the scientists I spoke to...are. Like, 'This isn't going to be good.'"

RBC Capital made the GBP/USD sell-off as the “trading of the week” and is still looking for a move to the 1.31 support, despite the recent rally. RBC’s findings that the dollar fell on repositioning suggests that the “dollar sell” narrative may not be permanent and the currency may soon return to its traditional “safe haven” status.

Technical Analysis

On the daily chart, the GBP/USD is still moving within a bearish channel, and is now embracing the lower line of the channel. Unless the pound gets new momentum, it is not surprising that the bearish move continues towards stronger support levels, the closest of which are 1.3245, 1.3180 and 1.3000. The second and third levels are enough to push the technical indicators towards strong oversold levels.

On the upside, the bulls need to break through the 1.3650 resistance over the same time period to trigger a reversal of the current bearish trend. The pound will be affected today by the announcement of the manufacturing PMI reading in Britain and the statements of the governor of the Bank of England. The US dollar will be affected by the announcement of the ADP survey of the change in non-farm jobs and the ISM industrial survey reading, in addition to new statements by US Federal Reserve Chairman Jerome Powell.

USD/JPY

Mahmoud Abdallah
Mahmoud has been working fulltime in the Foreign Exchange markets for 12 years. Offers his analysis, articles and recommendations at the most renewed Arabic websites specialized in the global financial markets, and his experience gained a lot of interest among Arab traders. Works on providing technical analysis, market news, free signals and more with follow up for at least 12 hours a day, and aims to simplify forex trading and the concept of trading for his audience.

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