- GBP/USD has been on the back foot amid US elections uncertainty.
- Progress in Brexit talks and a tentative flattening of the coronavirus curve may boost the pound.
- Wednesday's four-hour chart is painting a bullish picture.
Who will be the President of the United States? The long campaign is turning into a long count – and perhaps a recount. At the time of writing, too many states are too close to call, still waiting for the tallying of absentee ballots, and allowing for the arrival of more mail-in ballots.
The world is watching Georgia, Nevada, Wisconsin, Michigan, Pennsylvania, and perhaps additional states for an answer – which may take long hours. The longer the uncertainty continues, the better for the safe-haven dollar. The greenback gained ground but is off the highs.
Follow all the elections coverage here
The current map, with too many gray zones:
Source: NYT
While the results, their timing, and potential legal battles are unpredictable, there are reasons to favor sterling longs at this point.
Another uncertainty is the reaction in markets to a Trump or Biden victory. With Republicans poised to hold onto the Senate, investors may prefer the incumbent after all.
2020 Elections: Why markets may now ditch Biden and cheer Trump
The EU and the UK have reported progress in the recent round of talks and also agreed on a new one. Brussels and London are both quiet – refraining from accusations – and that is a positive sign for the pound.
Another reason for sterling strength is a tentative sign that Britain is flattering the curve of cases. While hospitalization may continue rising, there are higher chances that the upcoming lockdown is not extended. Prime Minister Boris Johnson's new shuttering begins on Thursday.
The UK caseload is flattering:
Source: FT
The encouraging development could also help keep the Bank of England from adding new stimulus, yet that remains an open question.
See BOE Preview: Lockdown raises chances of negative rates, sterling could suffer
Overall, there is room to the upside for sterling.
GBP/USD Technical Analysis
Pound/dollar is benefiting from upside momentum on the four-hour chart and has surpassed the 50, 100, and 200 Simple Moving Averages. These are all bullish signs.
Resistance awaits at 1.3020, a swing high from last week, and then 1.3060, 1.3085, and 1.3120.
Support is at 1.2880, and more importantly at 1.2855, a swing low. The round 1.28 level is next.
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