GBP/USD hits a session high of 1.2966, tests the 200-hour moving average

GBP/USD H1 19-10

The pound is keeping firmer to start the day as Brexit talks are expected to continue later this week despite the 'hard' rhetoric by UK prime minister, Boris Johnson, on Friday.

Adding to that is talk of the UK possibly tweaking its internal market bill to try and strike more of a compromise between the two sides. Bottom line is, a Brexit deal is not dead.

That is keeping the pound underpinned after meeting support around the 14 October low @ 1.2863 as well as the 50.0 retracement level @ 1.2879 at the end of last week.

Buyers are now pushing the agenda to try and test the confluence of the key hourly moving averages @ 1.2951-65. The 200-hour MA (blue line) @ 1.2965 is a key one to watch as that helped to limit gains on Friday and is being tested now.

Keep below that and sellers still stay in the game but break above, and buyers will then establish more near-term control in the pair instead.

Given how deadlines are there to be ignored, there is good reason to expect both sides to "work" towards something in the next few weeks. It may not be an outright deal but perhaps there is room to move a little so that talks can still continue.

In that lieu, the picture is now flipped and Brexit shop talk may be more supportive for the pound for the time being. But as always, just be mindful of headline risks in case.

Looking elsewhere, the pound does have its fair share of negative factors as well with the UK economic recovery stalling and the lack of fiscal drive by the government likely to prompt the BOE into action (negative rates?) sooner rather than later.