GBP/USD analysis: Brexit arm-wrestling continues

GBP/USD Current price: 1.3090

• Irish border issue remains unsolved, UK's Raab not traveling to Brussels this week.
• Risk aversion coming from different fronts exacerbated USD gains across the board.

Brexit kept the Pound on a rollercoaster in the first trading day of the week, with the GBP/USD pair hitting 1.3132, surpassing last week's high, but plunging to 1.3027 later, to finally found some stability at around 1.3090. The optimism about the EU offering a “super-charged” free-trade deal faded on dollar strength and comments from UK PM May's spokesman, who said that there is a big difference between optimistic talks and a done deal and that there can't be no withdrawal agreement without a price future framework. Additionally, it was reported that US Brexit Secretary Raab won't be heading to Brussels this week. The UK will only offer the Financial Policy Committee Statement this Tuesday, which most likely will pass unnoticed.

Technically, the pair is still confined to familiar levels, with the upside limited by the 1.3170 area, which stands for the 50% retracement of the 2016/18 rally, but above the 61.8% retracement of the same bullish run at 1.2880. There are no clear signs on directional strength in the 4 hours chart, as the price holds ever since the day started above the 20 SMA and the 200 EMA, both now converging around 1.3040, while technical indicators retreated sharply from overbought readings, the Momentum maintaining its downward strength but above its mid-line and the RSI recovering within positive ground limiting chances of a steeper decline. Seems unlikely that the pair can make a relevant breakout without headlines on whether or not, the EU and the UK reach an agreement on the Irish border issue.

Support levels: 1.3040 1.3000 1.2970                                                

Resistance levels: 1.3100 1.3130 1.3175

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