GBP/USD: Brexit optimism dominates with few sideshows in play

GBP/USD has seemed to focus on the fact that Brexit talks resume, kicking off the week with a gap and rising by around 1% as of writing. A new British proposal on the Level-Playing Field topic outweighs downbeat talk by the PM while Monday’s 4-hour chart is pointing to further gains, FXStreet’s Analyst Yohay Elam reports.

Key quotes

“London and Brussels are ‘very far apart’ – according to UK Prime Minister Boris Johnson after agreeing to extend Brexit talks and ‘go the extra mile.’ with the EU. Moreover, while Johnson is publically portraying pessimism – his team laid down a new proposal on the contentious Level-Playing Field topic. According to The Times, the two sides have been making progress on tariffs and on the LFP – one of three thorny topics.”

“The US begins its vaccinating campaign on Monday after the Food and Drugs Administration gave its final approval to the Pfizer/BioNTech jab late on Friday. While the move was expected, it adds to positive sentiment and weighs on the dollar.”

“Coronavirus continues raging in the US, with average daily cases, deaths and hospitalizations hitting new records. In the UK, the situation is stable, yet London may enter the more restrictive Tier 3 following an increase in infections. That would weigh on sterling.” 

“In Washington, Democrats and Republicans continue working on a stimulus bill. Markets would cheer any accord achieved in the lame-duck session – ahead of President-elect Joe Biden’s inauguration.” 

“GBP/USD has pierced through the 50, 100 and 200 Simple Moving Averages on the 4-hour chart on its way up – and momentum has turned positive as well. The Relative Strength Index remains well below the 70 level, thus far from overbought conditions.” 

“Some resistance awaits at 1.34, a level that capped GBP/USD in November. It is followed by 1.3480, a swing high seen last week, and finally by the 2020 peak of 1.3540. Significant support is only at 1.3230, which was a temporary low early in the month, followed by the December low of 1.3140.”