GBP/USD Forecast: Sterling faces tough resistance of 38.2% Fibonacci retracement at 1.2990

Looks like Brexit optimism is settling on Sterling market with the stop moving higher into the middle of the 1.2900-1.3000 range on Wednesday ahead of the Bank of England Deputy Governor Ben Broadbent speaking at London School of Economics. Investors are taking the advantage of the political chaos in the hope for Brexit delay.

The reason for markets to cheer Sterling is in the UK political development with the UK opposition Labor party hoping for a second referendum triggering a legislative move to avoid a no-deal Brexit scenario by supporting the idea of postponing the Brexit data from March 29 this year.

In the interview for BBC, the Labor party chief finance spokesman John McDonnell said that postponing Brexit is a way to avoid disasterous no-deal outcome.

Although economic consequences of delaying Brexit are negative as postponement is expected to weigh further on business investment and growth, the short-term foreign exchange market reaction is Sterling positive as the slide lower looks largely exhausted.

While Bank of England Deputy Governor Broadbent will speak today, the message for the markets will be expectedly clear voicing Brexit uncertainty as a major source of the economic slowdown.

The technical picture for Sterling point to GBP/USD being elevated in a sideways trend after breaking away from the downward sloping trend. The post-Brexit slump correction saw GBP/USD rise from 1.1800 to 1.4377 level and the GBP/USD is now trading just below 38.2% Fibonacci retracement of the upmove from 1.2130 to 1.4177 level at 1.2990.

The technical oscillators including the Relative Strength Index and Slow Stochastics are both elevated with Slow Stochastics making the bearish crossover in the Overbought territory. The GBP/USD is facing a tough resistance at Fibonacci retracement at 1.2990 and failure on the upside is set to see GBP/USD testing 1.2900 before moving back to 1.2800-1.2900 range.