GBP/USD Forecast: Sterling set on breaking double-top as dual talks extend

GBP/USD has been advancing as Brexit and US stimulus talks continue.
Investors are shrugging off the spread of top-tier lockdowns in the UK.
Wednesday's four-hour chart is showing bulls could break the double-top.

Yohay Elam FXStreet

"An agreement is within reach" – the words of Michel Barnier, the Chief EU Brexit Negotiator, are boosting the pound. The veteran French statesman added that the EU is ready for a deal, but not at any cost, and that time is running out. The transition period expires at year-end – and that is the hard deadline.

Nevertheless, the mere continuation of negotiations is music to pound bulls' ears after last week's crisis. Back then, EU leaders refused to intensify deliberations and Prime Minister Boris Johnson called the nation to prepare for a no-trade-deal exit.

GBP/USD has been rising also due to dollar weakness. The safe-haven currency has been on the back foot after House Speaker Nancy Pelosi expressed optimism about talks for a large fiscal stimulus bill – letting her self-imposed deadline lapse without cutting off talks.

Democrats and the White House team are pressing for a deal, yet Senate Republicans are reportedly pushing against an accord. They fear it could divert attention from the Supreme Court nomination and also expose fissures in the party before the elections. Pelosi and Treasury Secretary Steven Mnuchin will resume talks later on Wednesday.

President Donald Trump has marginally narrowed the gap with rival Joe Biden according to the latest opinion polls. The New York Times nationwide poll showed the Democratic candidate leading by nine points, the first high-quality poll to show a single-digit lead for the former VP. Moreover, races in several battleground states such as Pennsylvania and Ohio seem tighter.

The two septuagenarians will face each other in a televised debate late on Thursday and pollsters are set to publish several surveys ahead of the event.

Investors seem to be shrugging off coronavirus cases despite immediate implications to the economy. Additional English regions are entering Tier Three of restrictions – the harshest. By the weekend, around 14% of England and all of Wales will be under considerable limitations. Johnson's government is considering a nationwide "circuit-breaker" lockdown, yet that is still far from an operational plan.

Overall, optimism is prevalent, yet the dual set of talks may hit roadblocks – or even collapse.

GBP/USD Forecast

Pound/dollar has decisively broken above the 50, 100, and 200 Simple Moving Average on the four-hour chart while the Relative Strength Index is below the 70 level – thus outside overbought conditions. Topping it off with upside momentum, bulls are in control.

The double-top of 1.3065 is critical resistance. It was first hit last week, and then early on Wednesday. Above this cap, the next levels to watch are 1.3085 and 1.3130.

Support is at 1.3025, which was a peak earlier in the week. It is followed by 1.2980, where the 50 SMA hits the price, and by 1.2930.

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Author

Yohay Elam

FXStreet

Yohay is in Forex since 2008 when he founded Forex Crunch, a blog crafted in his free time that turned into a fully-fledged currency website later sold to Finixio.

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