Sterling is doing very well in the pre-Christmas period and is competing with AUD as the leading G10 currency this week. A latest study from the U.K. says the risks of the new Omicron variant are lower than initially thought and will not lead to severe restrictions, even if infections increase.When it comes to the fundamental situation, after the surprise rate rise by the BoE, money markets have also been piling on bets of more increases over the next year. Rates are expected to climb to 1.25% with four 25bp moves spread broadly across the year which may support Sterling.
Looking at the technical situation on GBPUSD, the pair broke above the key resistance area near 1,3350, which should act as a support for now. According to the Overbalance methodology, breaking higher the 1:1 structure may lead to a bigger upward correction or even trend reversal. The nearest resistance to watch lies at 1.3500, where previous price reactions as well as 50% Fibonacci retracement of the recent downward move started in late October are located.
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GBPUSD H4 interval. Source: xStation5
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