- GBP/USD has been moving in an ascending channel since late September.
- UK's Frost says there is still a gap between the EU and the UK negotiating positions.
- Near-term technical outlook points to additional gains as long as 1.3700 support holds.
The GBP/USD pair preserved its bullish momentum in the second half of the previous week despite the dollar's resilience and has gone into a consolidation phase above 1.3700 on Monday.
The renewed Brexit optimism combined with the Bank of England's (BoE) rate hike prospects helped the British pound find demand. Mirroring the broad GBP strength, the EUR/GBP pair slumped to its lowest level since February 2020 at 0.8422 on Friday.
However, David Frost, the British minister responsible for implementing the Brexit deal, has reportedly said there is still a gap between the EU's and the UK's negotiating positions with regards to the Northern Ireland protocol. In case the EU refuses to renegotiate the protocol and the UK asks for additional concessions, the GBP could find it difficult to continue to outperform its rivals. Meanwhile, several EU member states are pushing Brussels to prepare for a prolonged trade war with the UK.
On the other hand, the greenback seems to have started the new week on a firm footing with the benchmark 10-year US Treasury bond yield pushing higher following Friday's 4% gain.
The US Federal Reserve will release the September Industrial Production data later in the day but the US T-bond yields are likely to impact the dollar's valuation. On Wednesday, the Consumer Price Index (CPI) data from the UK could cement a rate hike in December, which will be primarily aimed at easing price pressures, and support the GBP.
GBP/USD technical analysis
The near-term technical outlook for GBP/USD remains bullish as the pair continues to fluctuate in the ascending regression channel coming from late September. On the upside, the initial hurdle is located at 1.3760 (upper line of the regression channel, static level) ahead of 1.3800 (static level, psychological level) and 1.3850 (static level).
The middle line of the regression channel forms the first support at 1.3720 before 1.3700 (psychological level, 200-period SMA and 20-period SMA, lower line of the channel) and 1.3640 (50-period SMA).
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