GBP/USD Forecast: Comeback for cable? Boris' Brexit blink set to outweigh Manchester's mutiny

Should I stay or should I go? That Clash song best described Prime Minister Boris Johnson's dilemma about Brexit talks after a clash with the EU – but it seems he will stay. If the PM resumes talks and is ready to compromise, GBP/USD has room to recover and even rally.

On Thursday, EU leaders allowed for more negotiations – but refused to intensify them. Moreover, they said that the ball is now in Britain's court, triggering angry responses from London. David Frist, Britain's chief negotiator, expressed disappointment.

However, Foreign Secretary Dominic Raab has said that "we are close to a deal," seems to hint that the UK is set to extend deliberations with the EU. Moreover, it is essential to remember that Johnson made a last-minute concession last year – agreeing to have a customs border in the Irish Sea – when seeking the divorce deal. He may go down that path again. That could further boost the pound. 

Johnson has another issue to deal with at home – COVID-19 cases are surging and his tiered policy is coming under scrutiny. Andy Burnham, Manchester's mayor, rejected the government's desire to put his city under Tier Three restrictions, the top level. Burnham aired grievances about dictations from the capital and asked for more funding. London, one of the world's financial centers, has entered Tier Two. 

The mix of worrying levels of infections and the lack of trust in the central government are hobbling sterling's advance.

Across the pond, stimulus talks remain stuck as House Democrats want a generous $2.2 trillion package, the White House is willing to agree on over $1.8 trillion, and Senate Republicans want only $500 billion – at least ahead of the elections. 

Trump and rival Joe Biden both held parallel town halls late on Thursday in an attempt to convince the few undecided voters. The incumbent continues trailing his challenger by over 9% in national polls and substantial margins in state polls. The race for the Senate is closer.

See Trump & Biden do little to impress during dueling town halls

Initial jobless claims disappointed with an increase to 898,000 for the week ending October 9, and now the economic calendar features a more significant publication – retail sales figures for September. Statistics for August fell short of estimates, partly due to a lapse of government support. 

See US Retail Sales September Preview: It's about employment

Another look expenditure – related to the labor market as well – comes from the University of Michigan's preliminary Consumer Sentiment Index for October. A steady read is on the cards.

See US Michigan Consumer Sentiment October Preview: It's really an employment survey 

Overall, Brexit hopes may outweigh other factors, at least temporarily. 

GBP/USD Technical Analysis

Pound/dollar is suffering from downside momentum on the four-hour chart but has recaptured the 100 Simple Moving Average. It is battling the 200 SMA and trades below the 50 SMA. 

Some resistance awaits at around 1.2950, the daily high, followed by 1.2980, a swing high from last week. The next lines are 1.3005 and 1.3080.

Support awaits at around 1.2865, the weekly low. Further down, 1.28 is strong support, and it is followed by 1.2760 and 1.2670.