- Bullish potential on the upswing after a successful weekend EU Brexit summit.
- Last week's Thursday bull-run on Brexit hopes may have overextended the GBP/USD, leaving buyers with little foothold for further gains in the near-term.
The GBP/USD is trading in circles around the 1.2820 level in early Monday action, and the London session is expected to open on the bullish side after this weekend's EU Brexit summit closed with a unanimous agreement on the current Brexit proposal, and the next critical step will be a vote in the UK's House of Commons, where Eurosceptics have been consistently threatening to veto Prime Minister Theresa May's frankenstein Brexit agreement, but key leaders from the EU, as well as PM May herself, are hitting the pavement running this week, throwing out clear warnings that a "nay" vote the UK parliament will not see a better alternative.
Britain's May to warn lawmakers on Brexit - Reuters
After months of negotiations and a few days of scrambling, the EU has managed to scrape together a tentative plan to build out a future customs agreement with the UK, and following this weekend's successful first round within the European Union, political pressure and lack of movement is expected to keep the hard-line Brexiteers in PM May's own Tory party in-line and playing by the rules, as noted by FXStreet's own Mario Blascak, PhD:
“Those who think that, by rejecting the deal, they would get a better deal, will be disappointed,” European Commission President Jean-Claude Juncker said after the 27 other EU leaders formally endorsed a treaty setting terms for British withdrawal in March and an outline of a future trade pact between the UK and the European Union.
The economic calendar greeting the GBP/USD pairing on Monday is a restrained affair, with an off-topic speech from the Bank of England's Governor Mark Carney later in the day at 18:00 GMT, where he will be giving his thoughts on Alan Greenspan's latest book, "Capitalism in America: A History", co-authored with the Management Editor of The Economist, Adrian Woolridge.
US data for the new trading week's first outing is also largely low-tier, excluding the Chicago Fed's Manufacturing Business Index for November, dropping at 13:30 GMT, which last came in at a steady reading of 0.17.
GBP/USD Levels to watch
Despite firm bullish potential from a significant positive showing on Brexit matters, the Sterling-Dollar pair is holding somewhat bearish from a technical perspective, according to FXStreet's own Chief Analyst Valeria Bednarik:
From a technical point of view, the pair offers a bearish stance, with the daily chart showing that it spent the week below its 20 DMA currently at 1.2900, while the weekly high was established at 1.2927, making of the area a strong static resistance and a possible bullish target. Technical indicators in the mentioned chart maintain their downward slopes within negative ground, indicating that bears retain control of the pair, and may continue to do so, despite whatever happens with the weekly opening. Shorter term and according to the 4 hours chart, the pair also offers a bearish perspective, developing over 100 pips below a bearish 200 EMA, also below the 20 SMA and while technical indicators head south, the Momentum around its mid-line and the RSI currently at 42.
Support levels: 1.2765 1.2720 1.2680
Resistance levels: 1.2835 1.2880 1.2930