GBP/USD steadies above 1.32, Brexit talks at a critical turn

Although the latest headlines suggest that it is unlikely for the EU and the UK to reach Brexit deal this week, the pound sterling continues to find the demand to lift the GBP/USD back above the 1.32 handle on Tuesday. As of writing, the pair was trading at 1.3211, adding 0.45% on a daily basis.

Citing a senior EU official, Reuters earlier today reported that British Prime Minister Theresa May's remarks on Monday suggested that a Brexit deal could be harder than expected. Furthermore, the EU's chief Brexit negotiator Michel Barnier said that despite their hard work for a comprehensive Brexit agreement, they needed more time to reach a deal. Finally, Irish Prime Minister Leo Varadkar stated that a no deal Brexit scenario was unlikely but he was concerned about the lack of progress.

Previewing tomorrow's Brexit event, "Even with numerous rumours indicating Brexit optimism during the second week of October, the latest view from the European Commission President Jean Claude Juncker indicated that the Brexit deal may turn out to be the last minute deal in November turning this week’s summit to become just another round of Brexit discussions," FXStreet European Chief Analyst Mario Blascak said.

Despite these headlines, the dismal performance of the USD and the euro during the day may have provided a boost to the GBP. The disappointing sentiment data from the euro area put the shared currency under bearish pressure on Tuesday and the DXY fell to its lowest in 20-days at 94.79 in the early trading hours of the NA session.

Furthermore, the UK's Office for National Statistics on Tuesday reported that wage inflation, measured by the average hourly earnings (including bonuses), rose to 2.7% on a yearly basis in August to beat the market estimate of 2.4%. Additionally, the claimant count rate and the unemployment rate remained steady at 2.6% and 4%, respectively.

However, after the data published by the U.S. Bureau of Labor Statistics showed that job openings in the U.S. reached its highest level with 7.1 million in August to surpass the analysts' expectation of 6.9 million, the US Dollar Index staged a modest recovery to make it difficult for the pair to push higher. At the moment, the DXY is down only 0.05% on the day at 95.

Technical levels to consider

The initial resistance for the pair aligns at 1.3235 (daily high) ahead of 1.3300 (Sep. 20 high) and 1.3360 (Jul. 9 high). On the downside, supports are located at 1.3200 (psychological level), 1.3110 (20-DMA) and 1.3050 (100-DMA).