GBP/USD: Will it regain 1.3400 on Brexit progress?

• DXY consolidates the upside above 93 handle.
• Finds support just ahead of 5-DMA at 1.3342.
• The UK and EU closing in on a Brexit deal.
• Eyes on the US prelim GDP, Carney speech and Yellen’s testimony.

Having hit the best levels in two months at 1.3387 in the overnight trades, the GBP/USD pair dropped sharply, hitting a low of 1.3336 in the Asian opening trades, before recovering some ground to trade back above 1.3350 amid Brexit optimism.

GBP/USD: Brexit - Deal or no deal?

Cable regained poise during the mid-Asian session, as the sentiment around pound remains underpinned by increased expectations that the UK PM May and EU will reach a deal on the Brexit settlement amount, after the Financial Times (FT) reported late-Tuesday, “Britain has bowed to EU demands and agreed to fully honor its financial commitments as identified by Brussels, removing one of the biggest obstacles to a Brexit divorce settlement." 

Moreover, the US dollar has entered a phase of upside consolidation, following yesterday’s rally backed by the signs of progress on the US tax cuts, upbeat economic data and bank-friendly comments from the Fed Chair nominee Powell. The USD index now trades flat near 93.20 levels, having hit three-day tops of 93.27.

However, further upside appears capped amid the renewed North Korea risks, after Yonhap reported that the North fired yet another ballistic missile, which could weigh down on the risk currency GBP.  

More so, the bulls remain cautious ahead of the key US prelim GDP figures and a mix of central bankers’ speeches, with the BOE Governor Carney’s speech and Yellen’s testimony to grab a lot of attention in the NY session.

GBP/USD Technical Levels

According to Valeria Bednarik, Chief Analyst at FXStreet, “In the 4 hours chart, the price bounced from a usually critical dynamic indicator, the 200 EMA, now above the 20 SMA, and with the RSI indicator having bounced sharply from oversold readings, now entering positive territory. The Momentum indicator in the mentioned chart lags, but also turned higher, although holding below its 100 level.  The pair has a scope now to retest the weekly high at 1.3382, and even extend its rally this Wednesday, particularly if US data disappoint. Support levels: 1.3310 1.3280 1.3240. Resistance levels: 1.3380 1.3420 1.3450.”