GBP/USD Forecast: Bulls add Mid-Terms on top of Brexit hopes, 1.3250 eyed

The GBP/USD is challenging the highs in the mid 1.3100s. The US Dollar is on the back foot as most networks have declared Democrats as the winners in the battle for the House of Representatives.

While the opposition party was a favorite from the outset, it was a dramatic night that saw Republicans have a fair chance of holding onto the lower chamber. Republicans did retain the Senate, as expected in opinion polls. 

The US Dollar fell, recovered and dropped once again and the GBP/USD moved alongside the predictions from pundits.

Live Coverage: Follow all the updates for the elections and currency movements 

Nevertheless, hopes for a Brexit deal as early as this week remain the critical driver of the British Pound and for the GBP/USD. A cabinet meeting on Tuesday ended without any dramatic announcement. Chief EU Negotiator Michel Barnier said, "we are not there yet."

However, the press speculates that the ministers may be called on later this week. The question of the Irish backstop tops the agenda as around 95% of the details have been agreed upon according to officials. 

GBP/USD Technical Analysis

The GBP/USD is trading at the highest levels since mid-October, and the Relative Strength Index (RSI) on the daily chart is far from the 70 level which indicates oversold conditions. This is one bullish sign. Also, the pair is trading and looks comfortable above the 50-day Simple Moving Average. Downside momentum is diminishing. 

The 1.3250 area capped the pair during several days in the middle of last month. 1.3300 is a round number and also was the peak in September. Beyond these levels, we are back to prices last seen in July, with 1.3360 serving as the next cap.

Looking down, 1.3290 was a swing low in mid-October. 1.3040 separated ranges in October and also in early November. Further down, 1.2960 was a stepping stone on the way up, and 1.2925 was a swing low in early October.