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  • UK’s Brexit Secretary Raab hints at a possible date to finalise the Brexit deal.
  • The sharp spike seen in the pair drags the DXY back below the 97 mark.
  • The ADP report reveals a higher-than-expected increase in private sector employment.

The GBP/USD gained more than 60 pips in a matter of minutes after a letter written by British Brexit Secretary Dominic Raab revealed that he was hoping to reach a deal by November 21. After touching a fresh session high of 1.2830, however, the pair quickly retraced its upside and was last seen trading at 1.2760, where it was still up 0.4% on a daily basis.

In the letter sent to Hilary Benn, Chair of the Exiting the EU Committee, dated October 24, “…I would be happy to give evidence to the Committee when a deal is finalised, and currently expect 21 November to be suitable,” Raab said. Although this letter revived optimism and helped the British pound gather strength, the fact that it doesn’t offer anything new in terms of progress in negotiations forced the market reaction to stay limited. Furthermore, responding to a question from the press on the letter, British Prime Minister Theresa May’s spokesman said that they wanted to reach a deal as soon as possible and didn’t touch on a specific date.

On the other hand, today’s data from the United States showed that despite the difficulty of finding skilled workers, private sector employment increased by  227,000 jobs from September to October to beat the analysts’ forecast of 189K. After rallying to a fresh 2018 high at 97.20, the US Dollar Index erased a portion of its daily gains during the GBP/USD upsurge but didn’t have a difficult time retaking the 97 handle. At the moment, the index was adding 0.05% on the day at 97.06.

The next significant catalyst for the pair could be the BoE meeting on Thursday. Previewing this event, “GBP is oversold, making it vulnerable to a hawkish surprise. But with little expected from the BOE, a catalyst for a reversal will depend on Brexit and broad USD tone. This will require more patience,” TD Securities analysts said.

Technical levels to consider

The pair could face the initial resistance at 1.2830 (daily high) ahead of 1.2920 (Oct. 25 high) and 1.3000 (psychological level/20-DMA). On the downside, supports are located at 1.2700 (daily low), 1.2660 (Aug. 15 low) and 1.2600 (psychological level).