GBP/USD analysis: Pound benefits from dollar's weakness, Brexit weighs

Valeria Bednarik FXStreet

GBP/USD Current price: 1.3399

UK PM May announced two options on further trade relationships with EU, no detail revealed.
GBP/USD decisive break to the upside depending on next week data and Brexit headlines.

The GBP/USD pair advanced firmly above the 1.3400 mark and reached a daily high of 1.3442 but the positive momentum faded and the pair closed the day little changed around 1.3400. Pound's rally came as a consequence of market's positive mood on ECB's headlines, and broad dollar's weakness. In a light-calendar week, attention gyrates around Brexit headlines these days. Speaking before the Parliament, UK PM May said that the government is analyzing two options on a customs union with the EU for after the Brexit divorce, although she didn't get into details. She also refused twice to answer when the government would publish its Brexit negotiation policy proposals when asked if they will be out ahead of the month-end summit with the EU. The Parliament will start debating the Brexit bill next June 12th, with the Labour Party already pressuring toward a softer Brexit that would imply full access to the single market.

The pair seems to be forming a round bottom and nearing a key resistance, the 1.3450 region, where it has multiple daily highs and lows from these last few months. A clear break of the resistance area is needed for the Pound to extend its gains, although investors may wait for next week data and Brexit news before taking firmer positions in the pair. Short term, and according to the 4 hours chart, the pair is developing above a firmly bullish 20 SMA, but still far below its 200 EMA, this last at 1.3525. Technical indicators have retreated within positive territory with uneven strength, as the Momentum nears its mid-line while the RSI holds near overbought readings, anyway not enough to suggest an upcoming downward move.

Support levels: 1.3395 1.3360 1.3320

Resistance levels: 1.3450 1.3490 1.3530

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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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