Pound rises to 5-week high

The British pound has posted gains on Wednesday. Earlier in the day, GBP/USD touched 1.3480, its highest level since November 19^th. This date was the last time that the pound was at the 1.35 line, a psychologically significant level.

The pound looked good last week, rising 1.18% and the upward trend has continued into Christmas week. Sterling has benefited from stronger risk sentiment, which has led to a move away from the safe-haven US dollar. The dollar index has dipped to 96.11, down 0.09% on the day, marking the fourth day of sideways trading. The index faces resistance at 96.30 and has support at 95.80.

Omicron rages but risk appetite remains intact

When Omicron first appeared on the scene several weeks ago, there were dire predictions about the damage another wave of Covid would cause to the global economy. Omicron has spread very quickly across Europe and the US, but investors remain optimistic that although Omicron is much more contagious than Delta, the symptoms are milder. Still, with infection rates skyrocketing in the US and Europe, there are fears that an Omicron wave could overwhelm hospitals, mostly with unvaccinated patients.

The World Health Organization has warned that Omicron could overload health systems, and France reported a new daily record of 180 thousand newly confirmed cases. In the meantime, the markets are ignoring the explosion in Omicron cases, preferring to focus on the low hospitalization numbers. Still, in a week of illiquid markets, one negative headline about Omicron could put risk sentiment in the freezer and boost investor appetite for the safe-haven greenback.

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GBP/USD Technical Analysis

• GBP/USD has support at 1.3349 and 1.3261
• There is resistance at 1.3462 and 1.3550

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