GBP/USD Forecast: Imminent break above 1.30? Brexit boosts pound, but Trump may send it down

Trick or treaty? An accord on future EU-UK relations may come around Halloween – the new deadline for concluding talks. Prime Minister Boris Johnson and European Commission President Ursula von der Leyen held a conference call on Saturday, agreeing to extend negotiations, thus boosting the pound.

On the other side of the pond, the safe-haven US dollar is retreating amid hopes that President Donald Trump will leave the Walter Reed hospital as his COVID-19 illness is improving. However, both stories have their caveats.

First, Brexit is far from being resolved. France has adopted a tough line on fisheries, a sensitive topic in London. Moreover, both sides are at loggerheads on state aid and other topics. Neither Brussels nor Britain published any details on progress, undermining sterling's rally. Investors have had their share of hopes and disappointments in recent weeks, and need substance to rally on.

Also on Trump's coronavirus condition, there are reasons to be cautious. Sean Conley, the president's doctor, revealed on Sunday that Patient No. 1 suffered two episodes in which his oxygen level dropped to worrying levels. While his fever is now under control, it may be a result of using dexamethasone – steroids used for severe COVID-19 cases.

If Trump was ushered to the hospital on Friday only on an "abundance of caution" – it makes no sense to release him so quickly. The dollar may still rise if the president remains under medical supervision for another night. 

See Stocks to surge on Trump's discharge hopes, four reasons why a crash may follow

On the other hand, there are higher chances for a fiscal stimulus deal. Trump has been speaking with Senate Majority Leader Mitch McConnell over the weekend, trying to advance the next relief package. House Speaker Nancy Pelosi also expressed optimism on Friday. 

Regarding the elections, Trump continues trailing behind rival Joe Biden in polls conducted after the chaotic debate between the two. Surveys after the president's positive coronavirus test. Investors prefer a clear outcome over a contested election, and the recent trends are pointing to that direction.

More Who will be the next president? Markets seem to care more about Congress' actions (for now)

The ISM Services Purchasing Managers' Index is set to show ongoing growth in September. It comes after Friday's Non-Farm Payrolls figures showed an increase of 661,000 positions, showing that the recovery is losing some steam.

Overall, the president's condition and Brexit are the top topics. 

GBP/USD Technical Analysis

Pound/dollar is benefiting from upside momentum on the four-hour chart and trading above the 50 and 100 Simple Moving Averages. While it is pressured under the 200 SMA, the general picture is bullish.

Some resistance awaits at 1.2975, last week's high, followed by 1.30 – a psychologically significant level which also capped GBP/USD during September. It is followed by 1.3050.

Support is at the daily low of 1.29, followed by 1.2840, which was a swing low last week. Next, 1.28 is a strong support line, after separating ranges in late September.