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GBP/USD has fallen sharply, crashing below uptrend support, as the UK’s coronavirus situation echoes the worst of the pandemic. The Brexit impasse and US elections uncertainty is also weighing on the pound while Wednesday’s 4-hour chart is pointing to further falls, FXStreet’s Analyst Yohay Elam briefs.

Key quotes

“Britain is gripped by a severe second wave of coronavirus and Prime Minister Boris Johnson is under pressure to issue a second national lockdown – and that is weighing heavily on sterling. The UK reported nearly 23,000 new confirmed cases on Tuesday, and 367 deaths – the latter being the highest level since late May. The PM seems reluctant to slap a national lockdown that would hurt the economy. However, the rapidly deteriorating situation and the fact that France and Germany are mulling similar measures may tip the scales.”

“While Chief EU Negotiator Michel Barnier extended his stay in London, these negotiations have yet to deliver a breakthrough. Charles Michel, the President of the European Council, said that both sides are at a ‘most difficult spot.’ Investors know that the only genuine deadline is December 31 but the diminishing hopes seem to hit sterling when it is down.” 

“With six days to go, over 70 million Americans – more than half of last time’s total vote count – have already cast their ballots. President Donald Trump continues trailing rival Joe Biden but seems to have made some headway in Florida, the perennial swing state. Markets are worried about a contested election and also worry that a split Congress would fail to pass the meaningful stimulus. New national, state, and Senate polls will be closely watched and could swing markets later in the day.” 

“Pound/dollar has collapsed below the uptrend support line that accompanied it since mid-October and has pierced the 50 and 100 Simple Moving Averages on its way down. Momentum is to the downside while the Relative Strength Index is still above 30, thus outside oversold conditions.” 

“Support awaits at 1.2910, which was a low point last week. It is followed by 1.2865, a double-bottom seen earlier in the month. Resistance is at 1.2985, which worked as support last week. It is followed by 1.3020, which capped cable earlier.”