GBP/USD: Above key hurdle for first since May on Brexit optimism
|- GBP/USD has crossed the 200-day average for the first time in five months.
- The breakout will likely be reversed if Brexit optimism fades.
- The EU and UK are closing on a draft deal, but the DUP is still playing hardball.
GBP/USD has found acceptance above the widely tracked 200-day moving average (MA) resistance for the first time since May 13 and will likely extend gains if Britain's Prime Minister Boris Johnson secures Democratic Unionist Party's (DUP) support for the draft Brexit accord.
While the European Union (EU) and the United Kingdom (UK) are closing on a draft Brexit deal, the DUP is still playing hardball.
DUP's leader Arlene Foster has rubbished claims that the party has agreed to support an arrangement where Northern Ireland would stay in the UK customs territory but adhere to the EU customs rules on tariffs.
"We want to get a deal but it has to be a deal that respects the economic and constitutional integrity of the United Kingdom and that means all of the United Kingdom, Northern Ireland included," Foster told BBC Northern Ireland, according to Reuters.
Note that the DUP's 10 lawmakers will play a key role in deciding whether Prime Minister Boris Johnson can pass any deal in parliament.
The British Pound will likely come under pressure if Johnson fails to get DUP'ssupport. In that case, GBP/USD may fall back to levels below the 200-day MA, currently at 1.2710.
However, if Johnson carries the day in parliament, the resulting Brexit optimism would bode well for the GBP.
Apart from the Brexit-related news flow, the pair may also take cues from the UKConsumer Price Index (CPI), scheduled for release at 08:30 GMT. As of writing, the pair is trading at 1.2752, representing 0.25% losses on the day.
Technical levels
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