Sterling rose to a 4-1/2-month high of 1.2889 as the dollar succumbed to U.S. COVID-19 and economic uncertainties, keeping focus off the pound's biggest potential weakness, which remains Brexit.
Cable's rise above the June 10 high at 1.2812reinforced the growing bullish structure, putting focus on resistance at 1.2907, the 200-week moving average and then 1.3020, the 76.4% Fibo of the December 2019-March 2020 dip from 1.3516 to coronavirus-related flash lows by 1.1413.
The current pound-positive tenor will need a boost from within the UK, particularly progress on EU-UK trade negotiations, if GBP/USD is to keep rising toward pre-COVID levels by 1.3200.
IMM spec futures positioning, currently -15k 1096742NNET, shows a substantial short component of approximately 61k contracts versus 46k long.
Should Brexit talks resolve positively those shorts are likely to unwind, lifting the pound toward pre-coronavirus highs.
However, continued Brexit intransigence would retard further gains and may prompt recent longs to exit, putting support by the 200-day moving average at 1.2701 and 10-DMA at 1.2678 in focus.
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