GBP/USD pivots around 1.3000 to start the session
The spike higher yesterday on the back of a Brexit deal optimism saw the pair move towards a test of the 100-day MA (red line) and resistance swing region at 1.3050. However, at the daily close, that proved to be one step too far. To begin the day, cable buyers did stage another rally to a high of 1.3036 but ultimately that fizzled and we're back down to near 1.3000 currently as traders continue to digest the latest developments in Brexit.
From a technical perspective, there hasn't been any key breaks to suggest an extension to the upside just yet. The 100-day MA @ 1.3026 and resistance region between 1.3050 and 1.3067 will prove to be tough areas for buyers to navigate through, but in times like these, it's all about headlines rather than systematic price movements.
Looking at the near-term chart, there's also resistance coming from the 61.8 retracement level @ 1.3042 helping to limit near-term gains in the pair and so far buyers have been unable to hold a break above the 200-hour MA (blue line). That means that a near-term bullish bias is yet to be established.
The price action here basically reflects pound sentiment or should I say Brexit sentiment in general. There are signs of progress and things are looking optimistic, but proceed with caution. That bit of cautious optimism is helping to keep the pound bid but not too much for the time being.
As mentioned earlier here, there are reasons to believe why the optimism now may be tempered with once a Brexit deal comes to a meaningful vote in parliament. So, unless headlines help enable a break above those key resistance levels, expect pound gains to level off around the highs yesterday.
I still expect the pound to benefit off good news such as when Cabinet signs off on the Brexit text and a summit is called for late November. However, be wary of the fact it doesn't mean that a deal is in the bag just yet.
