- GBPUSD Spot is driven by COVID-19, Brexit and the U.S. election
- Is the President in rude health? There is not any consistency in his message
- Market sentiment will swing behind Sterling as the election draws near
- Sterling will soar to challenge the 200-day moving average
GBPUSD Spot endured a sideway pattern of trading on Friday morning. However, this meaningless meander seemed to pivot at 1.2950 as Sterling found support and booked gains to close out the U.S. session at 1.3046. This keeps GBPUSD firmly within the impulsive that has been in place since May 12 as shown in Figure 1.
Pressure on the Pair
Any currency pair will see pressure on both the “Base” and “Quoted” elements. COVID-19 is a factor that buffets both Sterling and the Dollar. Single factors are Brexit for Sterling and the Presidential election for the Dollar.
For the time being we appear to be a vacuum re developments surrounding Brexit and as such it will mean the path the GBPUSD pair follows will be driven by the ebb and flow of the November 3 election. Given Joe Biden seems to be a relatively stable commodity, the Dollar and hence the pair are currently driven and determined by the rants of Donald Trump.
Did Someone Say Stimulus?
When the President was released from the “Walter Reed Army Medical Center” (U.S. spelling) he suddenly called the Republican negotiating team over a stimulus package back. Talks were abandoned… so sending the Dollar reeling, Figure 2.
There was then an overnight Twitter storm when the President said the airlines should be supported. Supported by stimulus hopes, the Dollar and Wall Street’s main indexes opened in the positive territory. However, whilst stocks made further headway, the Dollar weakened again.
What this seems to imply is that Sterling is the currency on an upward tear with spot looking to close in on the 50-day moving average that is located at 1.3290.
I am looking for the deluge of contradictory dialogue from the U.S. increasing over the next 23 days that are left until polling day. If the result is not clear cut, we have no result on the 3rd/4th and if Donald Trump refuses to engage in a peaceful transition I expect the Dollar to fall.
I target GBPUSD to a first target of 1.3290. I see Sterling breaking the highest technical level marked in Figure 3 with the 200-day moving average at 1.3290 as my objective; my stop is at 1.2863.