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  • GBP/USD gained some strong traction and rallied to fresh two-month tops on Tuesday.
  • Brexit optimism, mostly upbeat UK jobs report provided a goodish lift to the sterling.
  • Technical buying above the 1.3200 mark further contributed to the strong move up.

The GBP/USD pair shot to fresh two-month highs, around the 1.3270 region during the mid-European session, albeit quickly retreated few pips thereafter. The pair was last seen trading around the 1.3240 region, up over 0.50% for the day.

Following a subdued/range-bound price action over the past two days, the pair caught some fresh bids on Tuesday and build on last week’s goodish rebound from mid-1.2800s. The British pound was being supported by reviving hopes for a last-minute Brexit deal, especially after Britain said on Monday it was open to a sensible compromise on fishing.

As Britain and the EU resumed crucial negotiations in London on Monday, the EU’s chief Brexit negotiator Michel Barnier added to the optimism and said that they were redoubling the efforts to reach agreement on the future partnership, though a compromise on the level-playing field, fisheries and state-aid rules remains the key to unlock a deal.

The sterling got an additional boost after the UK monthly jobs reports showed that the number of people claiming jobless benefits unexpectedly dropped by 29.8K in September. This comes on the back of the latest optimism over the COVID-19 vaccine, which forced investors to push back the expectations of negative BoE interest rates to June 2021.

The strong intraday positive movement took along some short-term trading stops placed near the 1.3200 mark. Hence, the move up could further be attributed to some technical buying amid the lack of any strong follow-through buying around the US dollar, which remained on the defensive amid a promising development in late-stage COVID-19 vaccine trials.

That said, a goodish rebound in the US Treasury bond yields extended some support to the greenback and kept a lid on any further gains for the GBP/USD pair, at least for now. Nevertheless, the pair now seems to have found acceptance above the 61.8% Fibonacci level of the 1.3482-1.2676 downfall and seems poised to prolong its recent positive move.

Technical levels to watch