GBP/USD hovers around 1.3750, Brexit talks in London eyed

• GBP/USD struggles for clear direction, fails to extend Monday’s rebound.
• UK’s Brexit Minister Frost says EU’s NI proposal not enough, gives December deadline to solve the row.
• Market sentiment improves on stimulus hopes, US-China headlines but US dollar remains firmer, covid woes escalate in Britain.
• Brexit chatters in London, second-tier US data eyed for fresh impulse, US Q3 GDP will be the key.

GBP/USD stays defensive around 1.3765 heading into Tuesday’s London open. In doing so, the cable pair fades the previous day’s positive performance, the first in three, amid a cautious mood ahead of the key Brexit talks in the UK.

UK Brexit Minister David Frost conveyed his dissatisfaction from the latest Brexit talks and the European Union’s (EU) fresh proposal to overcome the Northern Ireland (NI) border issues to a parliamentary committee on Monday, per Bloomberg. On the other hand, Sky News reports, “The EU's current proposals to reform the Northern Ireland Protocol ‘don't go far enough’, the UK's Brexit minister has said, as he set a December deadline for the two sides to find a solution.”

On a different page, fears of faster virus mutations in the UK and the latest jump in the covid cases also weigh on the GBP/USD prices. “UK has seen close to 40,000 new cases per day for the last 4 days. UK health secretary has warned people of not letting their guard down as there could be 100,000 COVID cases per day as the country heads into the winter season,” said CNBC.

Elsewhere, upbeat sentiment probes the lackluster US Treasury yields but the US Dollar Index (DXY) remains firm, extending the previous day’s rebound from the monthly low. The reason could be linked to the hawkish Fedspeak and expectations of a firmer US Q3 GDP print backing the Fed taper tantrums.

Amid these plays, the US 10-year Treasury yields remain indecisive around 1.64% after a two-day downtrend whereas the stock futures print mild gains to refresh record tops.

Looking forward, a group of EU diplomats are up for visiting London on Tuesday, making the Brexit headlines more important for the GBP/USD traders. Given the lesser likelihood of a positive outcome, amid the US dollar strength, the cable pair may remain pressured and can look to the second-tier US data, like Consumer Confidence and housing numbers, for fresh impulse.

Technical analysis

Given the GBP/USD pair’s inability to cross the 100-DMA and 200-DMA, coupled with the steady RSI, the quote is likely to retest the previous resistance line around 1.3740-35. Also adding to the support’s strength is an ascending trend line from September 30.