GBP/USD Price Analysis: Acceptance above 50-DMA is critical to resume rally towards 1.3500

• GBP/USD clinging onto 50-DMA hurdle amid renewed Brexit tensions.
• Subdued Treasury yields and the US dollar help keep GBP bulls hopeful.
• Omicron concerns also threaten the upside attempts in cable.

GBP/USD remains on the defensive after peaking at five-week highs of 1.3461 on Tuesday, as the pound bears the brunt of the renewed Brexit concerns and a record rise in covid cases in the UK.

According to Politico, European Commission Vice President warned of a Brexit deal ‘collapse’ if the UK exits Northern Ireland (NI) Protocol. Meanwhile, the UK recorded a fresh all-time high in daily covid cases to the tune of above 122,000. The authorities have dismissed new activity restrictions during the year-end holiday season.

There is nothing much on the macro front and, therefore, markets will continue to follow the dollar dynamics, Brexit and Omicron updates.

Looking at GBP/USD’s daily chart, the pair is struggling to find a foothold above the 50-Daily Moving Average (DMA) at 1.3429.

Only a daily closing above the latter will revive the bullish momentum, calling for a test of the 1.3500 level.

The next upside target is pegged at the horizontal trendline resistance at 1.3516.

The 14-day Relative Strength Index (RSI) is trading listlessly but holds well above the midline, suggesting that the bulls could likely fight back control in the near term.

GBP/USD: Daily chart

Alternatively, Monday’s low of 1.3392 will protect the immediate downside, below which the December 23 lows of 1.3342 can be tested.

If the bearish pressure intensifies, then a sell-off towards the 21-DMA at 1.3297 will be inevitable.

GBP/USD: Additional technical levels