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  • GBP/USD has started out in early Asia sluggish on the upside and extending the recent bullish performance  as markets look back tot he BoE as a potential catalyst for higher levels speculating that there will be rate hikes sooner than later.
  • The pair ended the NY session at 1.3100 on Friday, up by +0.62% having  traded in a range of 1.3006 / 1.3124, generally better bid due to Brexit optimism.

EU negotiators said that a Brexit deal is “very close”. Jean-Claude Juncker, the head of the European Commission, was reported saying that the chance of the UK and the EU reaching a deal has increased in the last few days and could even be agreed by November. Then, European Council President, Donald Tusk, argued that 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”.

Eyes on Brexit ahead of European Summit

All eyes are on the 17, 18 and 19 October 2018, when the European Summit of the Heads of state and Government of the European Union and a ASEM (Asia-Europe Meeting)  will be held in Brussels in the buildings of the Council of the European Union, at the Rue de la Loi. Markets are looking for the deadlock to have come undone by then, so the next week in the Brexit saga is going to be key on what  already has the potential to be a  rollercoaster week:

GBP/USD levels

Technically, Valeria Bednarik, chief analyst at FXStreet explained that the pair remains in bullish ground according to the daily chart:

“Tt keeps developing below its moving averages, with the 100 DMA heading north over 200 pips below the current level. Technical indicators in the mentioned chart have retreated from overbought readings, maintaining downward slopes but far above their midlines, leaving doors open for further slides ahead. In the 4 hours chart, the pair is trading above firmly bullish 100 and 200 SMA, while technical indicators entered in negative ground with strong downward slopes, in line with the longer-term perspective.”

 Meanwhile, the bulls toppled the 100-D SMA and confluence  level at R2, 1.3113 and can target R3 at 1.3189 ahead of double top highs of the 1.3220 zone. However, on the flip side, on a break of the 1.2662, (Aug low  level on the wide),  the bears can then target 1.2589 as being the June 2017 low. 1.1985 is the H&S objective below there.