Search ForexCrunch
  •  Jean-Claude Juncker remains upbeat on Brexit, pound underpinned.  
  • GBP/USD looking for a break of trend line resistance  

GBP/USD was initially deflated today by a weak performance  in Chinese stocks that set-off a risk of atmosphere in markets at the start of the week – (SSEC closed down 3.7 pct).  However, an upbeat tone in Brexit negotiations has underpinned the pound and has enabled it to recover from the -0.51% losses in the European session.  From the weekend news, Japan’s PM Abe says he would welcome Britain to TPP, while  Jean-Claude Juncker said that a  chance  of deal has increased.    However, European Council President, Donald Tusk, said an agreement would not be possible until the end of 2018. The Irish border is still a sticking point and the Irish PM Leo Varadkar said there is still “a fair bit of work to be done” – The UK is due to leave the EU on 29 March 2019.

GBP  shorts have been choppy in recent weeks

With respect to positioning, analysts at Rabobank explained that  GBP  shorts have been choppy in recent weeks, reflecting uncertainty regarding Brexit and the UK political backdrop. “Last week  GBP  shorts moved to their lowest level since early August on the back of a little optimism regarding a Brexit deal.”

GBP/USD levels

GBP/USD is attempting to reverse the mid-September correction of the mid-Aug rally with demand stepping in at R3 and the current price on the verge of piercing the trend line resistance while now through the pivot at 1.3077. This is for a second attempt of the descending resistance trend line while the greenback keeps bleeding towards the key 95.70 level, despite the US  yields firmly holding onto bullish territory, (US 10-years 3.23%).  

 

Valeria Bednarik, chief analyst at FXStreet explained  that in the 4 hours chart, the pair recovered above its 20 SMA and 200 EMA, with the shortest gaining upward traction:

“Technical indicators were near overbought readings before losing upward strength, holding anyway nearby, supporting an upward extension up the  major Fibonacci resistance at 1.3170.  A strong static support comes at 1.3060, with a break below the level putting the pair on the bearish path short-term.”