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  • GBP/USD bounces up from 1.2855 and consolidates above 1.3000.
  • Hopes of a Democrat victory send the US dollar tumbling.
  • The market overlooks Brexit and COVID-19 fears.

The pound sterling’s bearish reaction from session highs at 1.3080 has been contained at 1.3010 area and the pair remains nearly 1% higher on the day, buoyed by the positive market mood.

USD tumbles on hopes of a Democrat win

The sterling has extended Monday’s rebound from 1.2855 low to levels beyond 1.3000, favoured by a broad appetite for risk. Investors seem to be pricing in a blue landslide in the US that would open the way for a large fiscal stimulus package and undermine demand for the US dollar in the mid-term.

With all eyes on the US elections, the investors are overlooking the lack of news from the Brexit negotiations, as well as the one-month lockdown announced by the UK Prime Minister, Boris Johnson, over the weekend, in an attempt to curb the increase of coronavirus infections in the UK.

GBP/USD could still retest the mid-1.2800s – UOB

From a technical point of view, the FX analysis team at UOB remains bearish about the GBP and does not discard a retracement to 1.2845 area: “GBP is deemed to be under mild downward pressure and could gravitate towards the major support at 1.2845’. GBP subsequently plummeted to 1.2854 but the decline was short-lived. From here, there is no change in our view and we still see a chance for GBP to test the 1.2845 level. Only a break of 1.3030 (no change in ‘strong resistance’ level) would indicate that the current mild downward pressure has eased. Looking forward, the next support below 1.2845 is at 1.2800.”

Technical levels to watch