GBP/USD Forecast: Suffering temporary altitude sickness ahead of the Corbyn-Johnson face-off

Last chance saloon for Jeremy Corbyn – the opposition leader faces Prime Minister Boris Johnson – with the PM well in the lead. Investors would prefer an outright victory for the Conservatives, and the 10-point gap – which has stabilized after having narrowed beforehand – should guarantee that. 

A Tory government is set to ratify Brexit and enact market-friendly policies. Markets are wary of seeing Corbyn in Downing Street, and he will need to excel in his debate with Johnson to have a chance of achieving that.

The BBC's Nick Robinson hosts the televised encounter at 20:30 GMT, with YouGov's instant poll expected at 21:30. Most of the market reaction will have to wait for Monday. Over the weekend, new opinion polls about voting intentions are also set to impact the open. 

Brits will go to the polls in six days, and tension is mounting. While GBP/USD has been on the back foot in recent hours, it is holding onto the vast majority of recent gains and trades above 1.31.

See the full preview: Five scenarios for the vote and potentially wild GBP/USD reactions.

Outside the UK election bubble

Broader markets are cheering the latest upbeat headlines related to Sino-American trade talks. The world's largest economies are seemingly closer to a deal, with China offering a goodwill gesture related to buying US agrifoods. However, such optimism has been seen beforehand, and stocks have been whipsawed by contradicting reports. Washington remains on course to slap duties on Beijing on December 15, unless an agreement is struck. 

Hopes for an accord have weighed on the safe-haven US dollar while pessimism pushed it higher.

The greenback is set to react to the all-important US Non-Farm Payrolls. Economists expect an increase of 180,000 in November, better than in October, while wage growth is predicted to remain at 3% yearly. The Federal Reserve will take the data into consideration in its upcoming meeting.

See

• Nonfarm Payrolls Preview: Economic health vs. trade war, who will win the battle?
• US Non-Farm Payrolls November Preview: Labor market continues to defy concerns

Overall, UK politics continue dominating sterling trading, with occasional impact from US developments. 

GBP/USD Technical Analysis

The Relative Strength Index on the four-hour chart is dropping below 70 – exiting overbought conditions. That may allow cable to resume its rises later on. Pound/dollar continues trading above the 50, 100, and 200 Simple Moving Averages, and upside momentum remains robust. 

Resistance awaits at the recent high of 1.165, which was a peak in early November. It is followed by 1.3180 and 1.3275, which date back to the spring. 

Initial support is at 1.3110, the daily low, followed by 1.3050 that played a role in May. October's peak of 1.3013 and November's high watermark of 1.2985 both switch to their new roles as support lines.