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GBP/USD Hit The Five-Week High Over 1.2700 - Eyes On Brexit Talks

EagleFX

The GBPUSD currency pair extended its early-day gains and took further bids above 1.2700 level due to upbeat trading sentiment backed by the virus vaccine progress, which weakened the broad-based U.S. dollar and contributed to the currency pair gains. The reason for the currency pair's bullish bias could also be attributed to the fresh optimism about European policymakers' agreement over 750 billion Euros of the aid package, which also boosted the risk-on market sentiment and added in the upward trend of GBP/USD pair. Whereas, the on-going Brexit concerns kept a lid on any additional gains in the currency pair.

At this moment, the GBP/USD currency pair is currently trading at 1.2690 and consolidating in the range between 1.2650 - 1.2716. However, the traders are cautious about placing any strong position ahead of the sixth round of the EU-UK Brexit talks, which will resume today. The risk-on market sentiment initially got support from the success of the vaccine backed by Oxford University and AstraZeneca's joint efforts. The results of a vaccine trial overshadowed the fears of the ever-increasing numbers of the virus. The British drugmaker AstraZeneca (LON: AZN) and Oxford University said that its COVID-19 vaccine induced an immune response in all study participants that received two doses. Whereas, the other two other separate vaccines were also developed by Cansino Biologics (HK:6185) alongside China's military research unit, and German biotech BioNTech (NASDAQ: BNTX) and U.S. drugmaker Pfizer (NYSE:NYSE: PFE). Moreover, the risk-on market sentiment was further bolstered by the positive reports about the receding pandemic numbers from the U.S.

Apart from the virus woes, the global markets cheered the European policymakers' agreement over 750 billion Euros of the aid package. It is worth reporting that the regional leaders succeeded in offering 350 billion Euros of loans and the rest as grants after five days of hard negotiations. On the other hand, the U.S. Senators showed their willingness to deliver another package of the stimulus. The resource suggested that the ruling Republican Party was planning to propose $1.0 trillion of an aid package, the opposition Democratic Party prepared a $3.00 trillion worth proposal to call themselves as a better ruler.

As in result, the broad-based U.S. dollar has been under pressure on the day. However, the losses in the U.S. dollar could be attributed to the uptick in the U.S. stock futures backed by the multiple factors which kept the currency pair higher. However, the British Pound got additional support from the BOE's Chief Economist Andy Haldane's comments that the U.K. economy hit the floor in April and suggested further recoveries. Whereas, his outlook for negative rates also gave some support to the local currency.

At the Brexit front, the 6th-round of the EU-UK Brexit talks are set to start today after the previous failures. Whereas, the bloc leaders claimed Britain's demands were tough, which kept the traders cautious. It should be noted that the updates came from the U.K. Express that the European Union fishermen were urging the regional leader to have the same access to U.K. waters after Brexit as they had before. The already lingering talks could take a tough start, which may weigh on the Pound.

The talks between the British and American diplomats in London are expected to happen smoothly as both parties' leaders have strong bonding. However, comments over China and 5G will offer intermediate moves to the markets. In the absence of the major data/events on the day, the market traders will keep their eyes on the USD price dynamics and coronavirus headlines, which could play a key role in influencing the intraday momentum. The traders will keep their eyes on the virus updates and news concerning China.


Daily Support and Resistance

S1 1.2321

S2 1.2468

S3 1.2563

Pivot Point 1.2615

R1 1.271

R2 1.2762

R3 1.2908

The GBPUSD has violated the triple top resistance level at 1.2660 level, and bullish crossover of this level opens further room for buying until 1.2735. The recent bullish engulfing candle on the 4-hour timeframe supports the bullish bias in the GBP/USD pair. Besides, the leading indicator, such as RSI and lagging indicators like 50 EMA, both support the buying trend. The pair may find support at 1.2660 level. Today, we should consider taking buying trade over 1.2655 level. Good luck!

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