The path of the least resistance for the pair is upwards, with the next level to watch being at the 61.8% retracement level at 1.3600.
Bullish View
Bearish View
The GBP/USD pair crossed a key resistance level on Wednesday as investors reflected on the rising US trade deficit and weak housing data. The pair rose to a high of 1.3500, which was the highest level since November 19th. It has risen by more than 2.50% from its lowest level in December.
US Deficit and Housing Data
The GBP/USD jumped because of the broad US dollar sell-off. The jump was mostly because of the relatively weak economic numbers from the United States.
On Wednesday, data by the Commerce Department showed that the US trade deficit widened to more than $97 billion in November. This was a 17% increase and the highest level on record. That happened as the country imported goods worth more than $252 billion. Its exports declined by about 1.2% to $154 billion.
The trends in imports are mostly because of increased purchases ahead of the holiday season. Indeed, data published by Mastercard showed that the country’s holiday sales jumped by 8% this year.
The GBP/USD pair also rose after data showed that some weakness was emerging in the housing sector. On Tuesday, data revealed that home prices declined for three straight months to October.
And on Wednesday, numbers showed that pending home sales declined by 2.2% in November after they rose by 7.5% in the previous month. Still, in all, the real estate sector did well in 2020, helped by low-interest rates and inventories.
The pair also rose as investors reflected on the ongoing Omicron trends. While the number of cases has increased recently, the symptoms are relatively mild. As such, there is a possibility that the economy will continue reopening.
Later today, the GBP/USD pair will react to the latest house price index from the UK and initial jobless claims data from the US.
GBP/USD Forecast
The four-hour chart shows that the GBP/USD pair has been in a strong bullish trend in the past few days. Along the way, the pair has managed to rise above the 38.2% Fibonacci retracement level. It has also risen above the 25-day and 50-day moving averages while oscillators like the Relative Strength Index and MACD have pointed upwards.
Therefore, the path of the least resistance for the pair is upwards, with the next level to watch being at the 61.8% retracement level at 1.3600.
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