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  • Brexit headlines boost to the demand for GBP on Thursday.
  • EU’s Barnier says they are in the final stage of negotiations.
  • US Dollar Index retreats toward mid-95s and finds support.

The GBP/USD pair gained traction on Thursday as concerns over a no-deal scenario eased on latest Brexit headlines. After advancing to a fresh 2-day high at 1.3040 the pair started to retrace its daily upside in the second half of the NA session and was last seen up 0.58% on the day at 1.3015.

Earlier today, citing EU sources familiar with the matter, Reuters claimed that the UK was preparing to make a new proposal on the Irish border that “makes finding a compromise possible,” and allowed the pound sterling to gather strength against its rivals. In fact, the EUR/GBP pair fell to its lowest level since mid-July. Commenting  on Brexit talks, the European Union (EU) Chief Brexit Negotiator Michel Barnier stated that they were in the final stage of negotiations and were working hand-in-hand with the Irish government.

On the other hand, the US Dollar Index, which advanced above the 96 mark on the back of rising T-bond yields on Wednesday, staged a technical correction and retreated to mid-95s despite the upbeat macroeconomic data releases from the United States. However, with the 10-year T-bond yield turning positive near 3.2%, the greenback began to recover its losses and was last seen down 0.2% on the day at 95.80.

“The worldwide spread of yesterday’s sell off in Treasuries, the U.S. 10-year reached a new seven year high of 3.22 percent in Europe, is a warning that the Fed’s rate normalization may be upon us, and at a rush”, FXStreet Senior Analyst Joseph Trevisani said.  

With today’s data out of the way, investors will be focused on tomorrow’s NFP report next. In a recently published report, Wells Fargo analysts announced that they revised their NFP forecast up to 210K following the ISM’s latest non-manufacturing PMI report.  “The employment index jumped to an all-time high of 62.4. We have subsequently raised our September nonfarm payroll forecast to 210,000 from 185,000. Respondents noted, however, that labor shortages are beginning to weigh on growth and earnings,” they explained.

Technical levels to consider

With a decisive break below 1.30 (psychological level), the pair could extend its losses toward 1.2950 (50-DMA) and 1.2900 (Sep. 7 low). On the upside, resistances are located at 1.3060 (100-DMA), 1.3115 (Oct. 1 high) and 1.3215 (Sep. 26 high).