GBP/USD: Boris set to break the bull/bear balance with two decisions

October 20, 2020 Off By admin-445
  • GBP/USD has been edging lower as the UK is currently refusing to resume Brexit talks. 
  • PM Johnson is set to decide on putting Manchester under stricter restrictions.
  • Tuesday’s four-hour chart is showing a fierce battle between bulls and bears. 
  • Construction works usually start with the basis – but with , things are different and the lack of progress is weighing on the pound.
    The UK government said that talks with Chief EU Negotiator Michel Barnier were constructive, but there was still no basis to resume official negotiations. Barnier spoke with his British government David Frost on the phone, instead of coming to London. Michael Gove, a senior minister, accused Brussels of refusing to seriously engage in talks, only to learn that Barnier said the bloc was willing to intensify talks, including on legal texts.
    Gove performed a U-turn on the dispatch box but the official British position remains that the EU first needs to make concessions. The neverending saga will have to end at the end of the year when the transition period expires. Until then, headlines are set to rock the pound. If Prime Minister Boris Johnson agrees to hold official talks, sterling could shine.
    The PM has another urgent topic in his intray – dealing with coronavirus. Cases are rising rapidly across the UK, and Wales announced a strict lockdown. In England, Liverpool is under Tier Three limits and London under Tier Two. The fate of Greater Manchester is set to be decided later on Tuesday amid a clash between mayor Andy Burnham and the central government.
    Johnson is on course to impose new rules – with or without consent. Apart from economic harm, the clash is costing the PM political capital. An orderly entry of Manchester into Tier Three would be better for sterling than ongoing bitterness.
    UK COVID-19 cases are rising rapidly. Adjusting for population, infections are exceeding the US.

    The next coronavirus stimulus package is high on the agenda for markets – and optimism on this topic has been weighing on the safe-haven dollar. House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin have reported progress, but they have yet to agree on all the topics. Moreover, any bill would have to pass the Republican-controlled Senate, which is reluctant to approve significant spending.
    President Donald Trump and rival Joe Biden continue campaigning two weeks ahead of election day and two days ahead of their final debate. The former VP has a substantial lead while the race for the Senate is closer. Investors prefer a full Democratic sweep that would provide generous fiscal support and despite the potential market-unfriendly policy.
    GBP/USD Forecast

    Pound/dollar is trading above the 100 and 200 Simple Moving Averages but below the 50 SMA, and momentum has flipped back down. All in all, the picture is mixed amid the tight range trading.
    Some support awaits at 1.2920, which is the daily low, followed by strong support at 1.2865, which is a double bottom. The next level to watch is 1.28.
    Resistance is at 1.2975, which was a swing high twice in early October. It is followed by Monday’s high of 1.3025, and then by 1.3080, the monthly peak.