GBP/USD Forecast: Bullish bias remains amid US fiscal impasse, Brexit optimism

• The latest optimism over the upcoming Brexit talks extended some support to the British pound.
• Sustained USD selling provided an additional boost and pushed GBP/USD to weekly tops on Friday.
• The impasse over the next round of the US fiscal stimulus continued undermining the greenback.

A combination of factors assisted the GBP/USD pair to regain positive traction on Friday and refresh weekly tops, around the 1.3140-45 region amid improving sentiment on Brexit trade talks. Britain's chief negotiator David Frost said on Thursday that a Brexit agreement can be reached in September. This comes ahead of the next round of talks about the future relationship – set to commence in Brussels on August 18 – and suggested that the two sides remain committed to reaching a deal, which, in turn, underpinned the British pound.

On the other hand, the US dollar remained depressed in the wake of the impasse over the next round of the US fiscal stimulus measures. It is worth reporting that the US Congress suspended talks for the COVID-19 stimulus package and left for a month-long recess on Thursday. The Senate will not return this month unless negotiators strike an agreement, fueling concerns about the US economic recovery from the damage caused by the coronavirus outbreak.

Meanwhile, Friday's mixed US macro data failed to impress the USD bulls or hinder the pair's intraday positive move. The US monthly Retail Sales recorded a growth of 1.2% in July as against the 1.9% rise anticipated. Conversely, sales excluding autos increased 1.9% MoM and the Retail Sales Control Group climbed 1.4%, both beating estimates. Separately, the preliminary Michigan Consumer Sentiment Index for August edged higher to 72.8 from 72.5 previous.

Despite the supporting factors, the pair continued with its struggle to find acceptance above the 1.3100 mark and settled around 60 pips off daily swing highs. However, a positive mood around the global equity markets kept the USD bulls on the defensive and helped the pair to catch some fresh bids on the first day of a new trading week. The global risk sentiment remained well supported by the optimism over a potential vaccine for the highly contagious coronavirus disease and got an additional boost from the postponement of the US-China trade deal review. The meeting was originally scheduled for Saturday and the delay leaves the phase one deal intact, at least for now

In the absence of any major market-moving economic releases from the UK, the USD price dynamics might continue to influence the pair's momentum on Monday. The US economic docket highlights the release of the Empire State Manufacturing Index, though is unlikely to provide any meaningful impetus to the major. The focus will remain on the FOMC meeting minutes, scheduled for release on Wednesday, which coupled with the incoming Brexit-related headlines will play a key role in determining the pair's next leg of a directional move.

Short-term technical outlook

From a technical perspective, the lack of any strong follow-through buying beyond the recent daily closing high resistance, around the 1.3140 region warrants some caution before placing fresh bullish bets. That said, some follow-through buying beyond the mentioned hurdle will set the stage for the resumption of the prior well-established bullish trend. The pair might then aim to test monthly swing highs, around the 1.3185 region before eventually moving beyond the 1.3200 level, towards reclaiming the 1.3300 round-figure mark.

On the flip side, any meaningful pullback might continue to attract some dip-buying and remain limited near the 1.3035 region. This is closely followed by the key 1.3000 psychological mark and support near the 1.2980 region, which if broken decisively will negate the bullish outlook. The pair might then turn vulnerable to accelerate the fall towards the 1.2900 mark before en-route the next major support near the 1.2815-10 region. The latter marks the previous swing high resistance breakpoint and should act as a key pivotal point for short-term traders.