GBP/USD: Sterling spooked by lockdown scare, Brexit hopes prevent free-fall (for now)

October 30, 2020 Off By admin-445
  • GBP/USD has been struggling to post a meaningful recovery as coronavirus fears take over.
  • Optimism about Brexit talks and uncertainty about the US elections are in play. 
  • Friday’s four-hour chart is pointing to the downside. 
  • A UK lockdown is creeping ahead of Halloween – additional regions have entered Tier Three of restrictions following increases in COVID-19 cases and a full nationwide shuttering cannot be ruled out. The pound is struggling.
    For now, Prime Minister Boris Johnson is rejecting calls to follow Germany and France with lockdowns, but it unclear if he can hold out for much longer. Covid infections are breaking daily records and deaths per population exceed the EU and the .

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    A ray of hope comes from talks where no news is good news for sterling. EU and UK negotiators are in Brussels, trying to find more common ground after reportedly making progress on the thorny topic of state aid. Michel Barnier, the bloc’s Chief Negotiator, tends to update the public on talks on Fridays. Will he do that again? Markets are awaiting.
    Tension is rising toward the elections in the US, where President Donald Trump continues trailing rival Joe Biden. An influx of national and opinion polls released on Thursday did little to change the overall picture – a lead of between 7-9 on the national level and an 89% chance of winning according to FiveThirtyEight.
    Moreover, some 82 million Americans have already cast their ballots, leaving little room for last-minute surprises. Nevertheless, many are skeptical about the polls after Trump’s 2016 surprising victory in 2016. Uncertainty is boosting the safe-haven dollar.
    The battle for the Senate – critical for passing a fiscal stimulus package – is closer. Republicans in the upper chamber have been reluctant to approve a generous relief package ahead of the vote, and the upbeat growth figures may make them even more hesitant.

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    The world’s largest economy posted a 33.1% annualized growth rate in the third quarter, beating estimates. Nevertheless, it comes after a collapse in the second quarter and output still remains below pre-pandemic levels.
    See 
    Overall, there are reasons for the safe-haven dollar to rise and the pound to fall.
    GBP/USD Technical Analysis

    Pound/dollar is suffering from downside momentum on the four-hour chart and has recently dropped below the 200 Simple Moving Average, after slipping below the 50 and 100 SMAs beforehand. With the Relative Strength Index holding above 30, the pair is outside oversold conditions, leaving it room to fall.
    Support awaits at 1.2880, Thursday’s low, followed by 1.2860, a double bottom from mid-October. Further down, 1.2770 awaits cable.
    Resistance is at the daily high of 1.2940, followed by 1.2990, which was a low point last week. The recent peak of 1.3020 is next.
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    Source: www.forexcrunch.com