GBP/USD steady around 1.3340 amid a risk-off market mood

• The discovery of a new COVID-19 variant in South Africa that could be harder to combat spurred risk-off market mood.
• The British pound fell on COVID-19 new variant though ended the day in the green, up 0.09%.
• GBP/USD upward move caused by US dollar weakness.

The British pound recovers from earlier losses during the day, despite risk-of-market sentiment clouding the financial markets due to discovering a new COVID-19 variant in South Africa. At the time of writing, the GBP/USD is trading at 1.3341, up some 0.14%.

In the overnight session, market sentiment dampened as South Africa announced the discovery of a new COVID-19 variant.

The World Health Organization (WHO) said that it is a variant of concern, posing a threat that could confound countries’ efforts to slow the spread of COVID-19. According to sources cited by CNBC, “that the variant contains a “unique constellation” of more than 30 mutations to the spike protein, the component of the virus that binds to cells. This is significantly more than those of the delta variant.”

The mutations found on the B.1.1.529 COVID-19 variant called omicron are linked to antibody resistance, affecting how the virus behaves regarding vaccines, treatments, and transmissibility. According to Tulio de Oliveira, a Scientist in South Africa, cited by CNBC, said the variant contains around 50 mutations.

Putting COVID-19 theme on the side, the latest development in Brexit could weaken the GBP. On Friday, UK Brexit Minister David Frost said that “while we would still like to find a negotiated solution with the EU on the Northern Ireland Protocol, the gap between our positions is significant, and we are ready to use Article 16.” Meanwhile, his counterpart Maros Sefcovic said that “a decisive push was needed to ensure predictability” in the case of supplying medicines.

Back to the GBP/USD, in the overnight session, the pair remained subdued, despite the risk-off mode that weakened most risk-sensitive currencies, versus safe-haven peers, except for the US dollar. The British pound dipped as low as the S2 daily pivot point at 1.3272 when the coronavirus news crossed the wires but bounced off, reclaiming the 1.3300 figure.

That said, GBP/USD traders would need to focus on the developments of Brexit, the Bank of England, and the new coronavirus variant. On Friday, GBP/USD bulls held their ground; however, coronavirus developments over the weekend could worsen market mood conditions that could favor USD bulls.

GBP/USD Price Forecast: Technical outlook

The GBP/USD pair keeps trading within a descending channel of 350 pips wide or so. The dip witnessed in the session on risk aversion briefly touched the bottom-trendline of the abovementioned. However, it rejected the downward move, forming a candle chart called “hammer” in the daily chart, indicating that bulls regain control in the near term. Nevertheless, the daily moving averages (DMA’s) with a downslope reside above the spot price, reinforcing the downtrend.

In the outcome of a corrective move to the upside, the November 12 swing low support-turned-resistance at 1.3352 would be the first resistance. A breach of that level would expose crucial resistance areas, like the September 29 cycle low support now resistance at 1.3411, followed by the November 18 high at 1.3513.

On the other hand, the 1.3300 psychological would be the first support, that once broken, could pave the way for further losses, finding key support levels on its way down. The next support would be the November 26 low at 1.3278, followed by the figure at 1.3200.