GBP/USD trims a part of Brexit headlines-led strong gains; some issues still need to be resolved

Haresh Menghani FXStreet

• Fresh Brexit optimism prompts some aggressive GBP short-covering move.
• Gibraltar issue remains unresolved and keeps a lid on any runaway rally.

The GBP/USD pair faded a knee-jerk bullish spike to levels beyond the 1.2900 handle and quickly retreated over 50-pips one-week tops touched in the aftermath of bullish Brexit headlines.

The British Pound caught some aggressive bids in reaction to a leaked Brexit document, which said the UK commits to align with EU rules on trade of goods and both parties could consider technological solutions to prevent the ‘hard border’.

Meanwhile, the European Council President Donald Tusk confirmed that a Draft Political Declaration on the Future Relationship between EU and UK has been agreed at agreed at negotiators’ level and agreed in principle at the political level, subject to the endorsement of the Leaders.

The positive momentum, however, started losing steam and the intraday retracement coincided with a headline from the EU, saying that issues of fishing, Gibraltar still needs to be resolved before Sunday's EU summit kept a lid on any subsequent up-move.

The pair was now seen trying to stabilize around the 1.2865-75 region, with holiday-thinned liquidity further seemed collaborating to keep a lid on any runaway rally ahead of the European Commission president Jean-Claude Juncker's meeting with the UK PM Theresa May at 1700 GMT on Saturday in Brussels.

Technical levels to watch

Any subsequent retracement now seems to find support near the 1.2830-20 region, below which the pair is likely to break through the 1.2800 handle and head towards retesting the 1.2765-60 zone. On the flip side, the 1.2900 handle now becomes immediate resistance and is followed by daily swing highs, around the 1.2925-30 region, which if cleared should assist the pair to dart towards reclaiming the key 1.30 psychological mark.

Author

Haresh Menghani

FXStreet

Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.

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