GBP/USD eyes 1.3400 as bulls cheer US dollar weakness, focus on PMIs, Brexit

GBP/USD eases from the intraday high of 1.3366 while trading near 1.3360 during the pre-London open session on Tuesday. The Cable prints 0.25% intraday gains by press time as the bulls prefer following US dollar (USD) declines over Brexit headlines ahead of the UK Manufacturing PMI for November.

US dollar index (DXY) fades bounce off the lowest since April 2018, marked the previous day, as US officials highlight concerns over the economic recovery while pushing for the coronavirus (COVID-19) aid package. Be it Fed Chair Jerome Powell or US Treasury Secretary Steve Mnuchin, not to forget Dallas Federal Reserve Bank President Robert Kaplan, all of them showed discretion about the likeliness of the world’s largest economy to lost recovery moves if the much-awaited stimulus stays far.

Other than the stimulus hopes, expectations of the vaccine’s early arrival also favored the mood. Recently, Moderna put forward an application to use their anti-covid drug for an emergency to the US Food and Drug Administration (FDA).

At home, neither the UK nor the European Union (EU) is ready to step back over the key issues like fisheries, level playing and governance. On the contrary, UK PM Boris Johnson reiterated the British refrain from changing the sides while also pushing companies at home to prepare for the no-deal departure. Even so, Irish Irish Prime Minister (PM) Micheál Martin said Tuesday, adding that “there are options available to complete a Brexit trade deal.”

Traders may also take note of the recently easing covid numbers from the UK while checking for extra clues to the latest upside. “Britain reported 12,155 new cases of coronavirus on Sunday and 215 new deaths within 28 days of positive COVID-19 test, government data showed. Both measures are down from Saturday, when there were 15,871 new cases and 479 deaths,” said Reuters.

Moving on, the Brexit headlines will be the key while the second readings of the US and British manufacturing activities for November may offer an extra filter for the trade decision. It should also be noted that the COVID-19 updates and vaccine news, coupled with the US stimulus developments can also become important to watch.

Technical analysis

Monday’s inverted hammer, bullish candlestick, on the daily chart (D1) joins sustained trading beyond 10-day SMA, currently around 1.3320, to direct the GBP/USD buyers towards the November high near 1.3400.