GBP/USD Forecast: Vulnerable to further falls as Boris' bulldozer blown by powerful poll

Prime Minister Boris Johnson has driven a digger with a "Get Brexit Done" sign through a wall with "Gridlock" written on it. That is the picture that he wanted to have splashed on all newspapers on the last day before the vote. 

However, a poll showing a significant chance of a hung parliament has taken over the show – and sent GBP/USD sharply lower shortly after hitting a new seven-month high at 1.3215.

YouGov's highly regarded Multilevel Regression Post-stratification (MRP) poll has shown the Conservative advantage shrinking from 68 to only 28 seats. The costly statistical exercise talked to some 50,000 people, substantially more than the standard 1,000.

Moreover, the surveying firm that correctly foresaw a hung parliament in 2017 – said that this scenario may repeat itself as many constituencies are hard to call. Chris Curtis, YouGov's boss, tweeted that the chances of a Tory victory are 70% while an inconclusive result has 30%. Ominously, the esteemed FiveThirtyEight website projected a70% probability for Hillary Clinton to win Donald Trump on the eve of the US elections in 2016. 

Investors would prefer a substantial victory for Johnson, one that would allow ratifying his Brexit accord and allow for business-friendly policies. Financial markets are a way of Labour leader Jeremy Corbyn's spending and nationalization plans – and also the uncertainty on the UK's exit from the EU.

Brits go to the polls on Thursday with many voters still undecided. Pound trading will likely become jittery in response to every election-related headline and poll.

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

Outside election fever

UK Gross Domestic Product figures disappointed on Tuesday by showing no growth in October. The economy last expanded in July and the Bank of England may react to the news in its December 19 decision. 

Broader markets are waiting for a resolution in the Sino-American trade war. White House officials have said that President Donald Trump has yet to decide on delaying the tariffs planned for December 15. However, negotiators from the world's largest economies are working on postponing the levies. The president is set to meet his trade team on Thursday. 

The Federal Reserve is set to leave interest rates unchanged after three consecutive cuts. Markets will watch the dot-plot for hints about policies in 2020. 

See

• Federal Reserve Preview: Watching for the Projection Materials
• Fed Preview: Is the bar higher for hiking? Powell's may down the dollar, three things to watch

Ahead of the Fed, the US releases inflation figures, with the Core Consumer Price Index set to hold at 2.3%. 

Overall, pound/dollar traders will likely pay some attention to these significant events, but the main driver remains the elections. 

GBP/USD Technical Analysis

Momentum on the four-hour chart has turned negative following the last drop – a bearish sign. On the other hand, sterling has enjoyed higher highs and higher lows in the past week, showing that the broader trend is positive. The pair continues trading above the 50, 100, and 200 Simple Moving Averages. 

Support awaits at 1.31. The round number provided support last week. Further down, 1.3080 played a role in the spring. More significant support awaits at 1.3013, which was October's peak, and then 1.2985, November's high. The next lines to watch are 1.2950, 1.2885, and 1.2870.

Resistance awaits at 1.3180, which was a swing high earlier this week, and the new seven-month high of 1.3215. The next lines are 1.3275 and 1.3380, dating to early this year.