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  • Pound corrects lower against US Dollar, remains sharply positive against its European rivals.
  • DXY rebounds from two-year lows, erases daily losses.

The GBP/USD pair reached earlier on Tuesday at 1.3483, the highest level since mid-December and then pulled back. The correction lower from the new top found support above 1.3400 and as of writing, it trades at 1.3440/50, up 80 pips for the day, about to post the third daily gain in a row.

A broad-based slide of the US dollar pushed cable to fresh monthly highs. The pair was also supported by a stronger pound that is the best performer on Tuesday among European currencies. Despite the lack of improvement in Brexit negotiations the pound keeps strengthening. EUR/GBP dropped below 0.8900 for the first time since June while GBP/CHF climbed to 1.2222, the highest since early June.

The US dollar was mostly lower across the board, with the DXY trading under 91.80 at the lowest in two years but following the release of US economic data it recovered momentum and trimmed losses. Recently the index hit 92.19, a fresh daily high and currently trades around 92.05. The ISM Manufacturing index rose to 56 in August, beating expectations.

Levels to watch

The GBP/USD found resistance around 1.3485, if the pair breaks above it would likely test 1.3500, then the next level to watch is 1.3510/15 (2019 high). On the flip side, immediate support stands at 1.3420 followed by 1.3400, a short-term uptrend line.

 

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