The GBP/USD pair is crawling back today after falling by more than 1% yesterday. It declined after Boris Johnson announced a new harsh lockdown in England as the new variant of the virus continued to spread. The GBPUSD is trading at 1.3595, which is slightly higher than yesterday’s low of 1.3543.
What happened: The United Kingdom has become the new epicenter of the coronavirus pandemic in Europe, fuelled by the new variant of the virus. The number of new cases soared by more than 50,000 yesterday, the highest reading since April.
Therefore, to curb the spread, Boris Johnson announced that the country would move to a new national lockdown as the vaccinations continue. As such, this risks putting the economy and public resources at a significant risk even as the country avoided a no-deal Brexit situation.
What next: Later today, the GBP/USD will react to the latest ISM manufacturing PMI from the United States that will come out at 15:00 GMT. Economists expect the data to show that the PMI declined to 56.6 in December. The pair will also react to the outcome of the Georgia Senate election.
Looking at the hourly chart, we see that the GBP/USD dropped sharply yesterday after the new lockdown was unveiled. Today, it has formed a bearish flag pattern that is shown in blue. It is also at the same level as the 25-period and 15-period moving averages while the RSI has moved from the oversold level of 25 to the current 50.
Therefore, I suspect that the pair will continue rising today and possibly hit the 1.3650 level. It will then decline and possibly below yesterday’s low of 1.3542.
Read our yesterday’s GBP/USD forecast here. In it, we accurately predicted that it would rise to 1.3700 and then pull-back.
GBPUSD technical chart