GBP/USD Forecast: Levels to watch after Farage's fireworks, outlook bullish

The man that was one of the architects of Brexit has been stirring sterling one again – this time to the upside. Nigel Farage, leader of the Brexit Party, has announced he will abandon his plans to field candidates in all of Great Britain. His new party refrains from competing with incumbent Conservative MPs – allowing them a smoother path to reelection. The right-wing outfit will still compete against Labour and other parties.

Farage's surprising move – a U-turn from a pledge he made only two weeks ago – has sent sterling higher. GBP/USD is edging closer to 1.29 after struggling with 1.28 beforehand.

Markets now see higher chances that Prime Minister Boris Johnson wins an absolute majority – thus ratifying his Brexit accord and enacting market-friendly policies. The "Leave Alliance" lowers the odds of seeing Jeremy Corbyn – the hard-left leader of the Labour Party – entering Downing Street. 

Weak UK growth, trade concerns

The political developments come only three days before the parties must submit their candidates' lists – and wipes out the pessimism that has engulfed GBPUSD. The pound was on the back foot after UK Gross Domestic Product third-quarter growth came out at 0.3% quarterly and 1% yearly – below expectations. While Britain enjoyed faster expansion than the euro-zone, the meager figures are showing that Brexit uncertainty is taking its toll.

On the trade front, President Donald Trump has said that reports that the US and China would remove tariffs are incorrect. He also bashed China, saying that the world's second-largest economy's supply chain is "broken like an egg." His words – accompanied by silence from Beijing – have been weighing on markets. 

Eric Rosengren, President fo the Boston branch of the Federal Reserve, will speak later in the day. However, GBP/USD is mostly moving in response to UK developments, extending the same behavior observed last week.

GBP/USD Technical Analysis – higher levels eyed

On the four-hour chart, GBP/USD has broken above the 50 and 100 Simple Moving Averages it lost earlier, and momentum is about to turn positive. It has also recaptured the uptrend support line it lost earlier. 

Sterling faces resistance at 1.2920, which worked as a separator of ranges last week. Next, 1.2950 also worked as resistance in early November. It is followed by the late-October peak of 1.2980. The cycle high of 1.3013 towers over the pound.

Support awaits GBP/USD at 1.2785, which was a low point in mid-October. It is followed by 1.2765, seen late last week. 1.2705 and 1.2660 await below. 

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