Sterling rises to eleven-week high on vaccine, Brexit deal optimism
Sterling rallied to new eleven-week high on Monday, driven by strong risk appetite on positive news about potential coronavirus vaccine and rising optimism about Brexit deal.
UK and EU negotiators continue talks this week with hopes to agree a deal before post-Brexit transition deal ends in five weeks, as failure would revert Britain to trade with the European Union on World Trade Organization, the scenario both sides try to avoid.
The pound was up around 0.6% since opening on Monday, also lifted by stronger than expected rise in the UK manufacturing sector in November.
Traders focus on the UK’s spending review that Financial Minister Rishi Sunak is going to unveil on Wednesday, following his comments over the weekend that there would be no return ton austerity, even as coronavirus crisis pushes Britain’s debt further above two trillion pounds.
Technical studies give mixed signals as today’s eventual break above pivotal 1.33 resistance zone was positive, along with north-heading daily moving averages that underpin the advance, but fading bullish momentum and overbought stochastic on daily chart and thick monthly cloud above, weigh and warn of stall.
Daily close above 1.33 zone would generate initial positive signal and open way for probes above 1.3400 barrier and potential test of key med-term barriers at 1.3482/1.3514 (Sep 2020/Dec 2019 highs).
Near-term action is expected to remain biased higher while holding above 1.3300 support zone, with extended dips to stay above rising 10DMA (1.3242) and keep bullish stance.
Res: 1.3380; 1.3400; 1.3482; 1.3514
Sup: 1.3311; 1.3298; 1.3279; 1.3242