GBP/USD Forecast: British pound showing signs of life on renewed Brexit optimism

The British pound suffered small losses in the first two trading days of the week but seems to have started to shake off the cobwebs on renewed Brexit optimism.

According to several news outlets, the European Union will propose to remove up to 50% of customs checks on British goods at Northern Ireland border. Maroš Šefčovič, European Commission Vice President of Interinstitutional Relations and Foresight, said that they will be offering "very far-reaching" changes to resolve the issue surrounding the movement of UK goods, including medicine. 

On a concerning note, the UK's FTSE Index is trading in the negative territory on Wednesday, suggesting that investors remain cautious despite the above-mentioned developments.

Meanwhile, the data from the UK revealed that the Gross Domestic Product (GDP) grew by 0.4% on a monthly basis in August, compared to analysts' estimate of 0.5%, after contracting by 0.1% in July. Additionally, the UK's Office for National Statistics reported that Industrial Production and Manufacturing Production both expanded at a more robust pace than expected. Nevertheless, these data had little to no impact on the GBP's valuation against its major rivals.

Later in the day, the US Bureau of Labor Statistics will release the September Consumer Price Index (CPI) data for September. Additionally, the Federal Reserve's September Meeting Minutes will be looked upon for fresh impetus.

Even if the greenback receives another boost from Wednesday's events, GBP/USD could stay resilient in case Brexit headlines help the pound find demand. 

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GBP/USD Technical Analysis

There is a bullish shift in the near-term technical picture with GBP/USD holding above the 20, 50 and 100-period SMAs on the four-hour chart. Additionally, the Relative Strength Index (RSI) indicator is holding above 50, revealing that buyers are starting to show interest in the GBP. 

On the upside, the first resistance emerges at 1.3650 (static level) ahead of 1.3675 (October 11 high) and 1.3700 (psychological level, 200-period SMA). 

Initial support seems to have formed in the 1.3610-00 area, where the Fibonacci 23.6% retracement of the latest uptrend and the 100-period SMA is located. Below that level, buyers could looks to defend 1.3580 (Fibonacci 38.2% retracement) and 1.3540 (Fibonacci 50% retracement).