GBP/USD Analysis: A Brexit deal around the corner?

Valeria Bednarik FXStreet

GBP/USD Current Price: 1.2777

Headlines suggesting a draft Brexit deal sent GBP/USD to its highest in five months.
EU Summit next Thursday could finally include a breakthrough to the UK’s departure from the EU.
GBP/USD bullish momentum depending on headlines, 1.3000 at sight

The GBP/USD has pair surged to 1.2799, a fresh five-month high, following headlines suggesting prospects of a draft Brexit deal. Market talks hint that UK PM Boris Johnson could table a new proposal before the end of Tuesday, paving the way for a breakthrough at the upcoming EU summit later this week. Not all are roses, as the DUP came forward noting that it won’t support PM’s deal if it includes more concession to the EU, while a senior EU official said that reports of an imminent Brexit deal were “way too premature.” Nevertheless, the pair held on to substantial gains by the end of the US session and could extend its rally during Asian trading hours if PM Johnson comes out with a new proposal.

In the data front, the UK released its latest employment figures, with the unemployment rate up to 3.9% in the three months to August, and mixed wages’ growth, as Average Weekly Earnings excluding bonus rose by 3.8%, beating the market’s expectations, although including bonus rose also by 3.8%, against an expected 4.0% gain. The Claimant Count Change, that is, the number of people claiming jobless benefits, rose by less-than-anticipated, up by 21.1K in September. This Wednesday, the UK will unveil inflation September data, seen generally better than in August.

GBP/USD short-term technical outlook

The GBP/USD pair is heading higher, and would likely ignore technical signals, but rather keep reacting to Brexit-related headlines. In the 4 hours chart, the 20 SMA maintains a firmly bullish upward slope far below the current level but well above the larger ones, reflecting the positive momentum of the pair. The Momentum diverges from price action heading lower although within positive levels, while the RSI consolidates around 80, suggesting some consolidation ahead of the next directional move. The immediate resistance is at 1.2813, May 21 daily high, with gains beyond it opening doors for a rally toward the 1.3000 figure.

Support levels: 1.2710 1.2660 1.2620

Resistance levels: 1.2815 1.2865 1.2910

View Live Chart for the GBP/USD

Author

Valeria Bednarik

FXStreet

Valeria Bednarik was born and lives in Buenos Aires, Argentina. Her passion for math and numbers pushed her into studying economics in her younger years.

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