I will point to a reference,
Three things must happen for you to see a rainbow's colors. First, the
sun must be shining. Second, the sun must be behind you, and third,
there must be water drops in the air in front of you. Sunlight shines
into the water drops, which act as tiny prisms that bend or "refract"
the light and separate it into colors.
Actually, the rays of light bend twice. As they enter the drops, the
rays of light bend, then reflect off the back of the drops. Then they
bend again, this time while exiting the drops. That's when the light
appears before our eyes.
Each drop reflects only one color of light, so there must be many
water drops to make a full rainbow. You'll see the brightest rainbows
when the water drops are large, usually right after a rain shower.
The rainbow is circular because when a raindrop bends light, the light
exits the raindrop at an angle 40 to 42 degrees away from the angle it
entered the raindrop.
and regarding full circular rainbow,
But if the sun is very low in the sky, either just before sunset or
just after sunrise, we can see a half circle. The higher the sun is in
the sky, the less we see of the rainbow.
The only way to see the full circle of a rainbow in the sky is to be
above the raindrops and have the sun behind you. You would have to
look down on the drops from an airplane.