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GBP/USD has been on the back foot due to rising UK and US coronavirus cases but sterling is set to rise amid Brexit optimism and bounce at uptrend support, Yohay Elam, an Analyst at FXStreet, reports.

Key quotes

“Michel Barnier, the EU’s Chief Brexit Negotiator has extended his stay in the British capital for further talks. This development is seen as a sign that weekend talks were productive. Moreover, Northern Ireland minister Brandon Lewis said that there is a good chance of a deal with Brussels.” 

“COVID-19 cases have continued rising in Britain, suggesting further restrictions could be slapped. The disease is also spreading in America, with record numbers of nationwide infections and also pressure on hospitals in several states. While the pound may come under pressure from the UK’s covid situation, the dollar is already attracting safe-haven bids – despite the worsening situation stateside.”

“The greenback is receiving haven flows as US stimulus talks seem to be falling apart. Democrats and Republicans moved from expressing cautious optimism to finger-pointing. Recent interviews by House Speaker Nancy Pelosi and White House Chief of Staff Mark Meadows have weighed on markets.” 

“Pound/dollar has bounced off an uptrend support line that has been accompanying it since mid-October. It also escaped dropping below the 50 and 100 Simple Moving Averages on the 4-hour chart, a bullish sign. On the other hand, momentum has turned negative. 

“Support awaits at the daily low of 1.2990, followed by 1.2910, which is where the 200 SMA hits the price. Resistance awaits at 1.3060, the daily high, followed closely by 1.3080, a peak from mid-October.”