GBP/USD opened with a positive gap on Monday, after UK PM Boris Johnson and EU Commission President Ursula von der Leyen told negotiators to continue talks over a potential trade accord beyond Sunday. The pair continued marching north during the European session today, with EU Brexit negotiator Michel Barnier saying that sealing a trade pact with Britain before December 31st was still possible.
From a technical standpoint, the positive developments surrounding the Brexit landscape have pushed GBP/USD above the 1.3410 resistance (now turned into support) barrier, which is marked by an intraday swing high formed on December 9th, as well as by the inside swing low of December 4th. Overall, the pair continues to trade above a tentative upside support line drawn from the low of September 25th, and thus, we would consider the near-term outlook to be cautiously positive.
More upbeat headlines are likely to encourage the bulls to stay in the driver’s seat and perhaps challenge the 1.3478 barrier soon, marked by the high of December 9th. If they don’t stop there, the next key resistance may be the peak of December 4th, at 1.3540. Another break, above 1.3540, will take the rate into territories last seen in May 2018, and may set the stage for extensions towards the peak of the 10th of that month, which is at around 1.3620.
Shifting attention to our short-term oscillators, we see that the RSI lies above 50 and points up, while the MACD, although fractionally negative, runs above its trigger line, pointing north as well. It could also turn positive soon. Both indicators suggest that the rate has started to gather upside speed and support the notion for further advances.
In order to start examining the case of a decent correction to the downside, we would like to see a dip below 1.3325, marked by the inside swing high of Friday. Such a move may initially pave the way towards Thursday’s low, at 1.3245, the break of which may extend the setback towards the aforementioned upside line taken from the low of September 25th.
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