GBP/USD fluctuates wildly on Brexit headlines, remains above 1.33 handle

• The Telegraph claims that negotiators reached a deal over Brexit bill.
• A British government official denies the report.
• DXY sticks to daily gains above the 93 mark.

After plummeting to its lowest level in a week at 1.3220 during the first half of the NA session, the GBP/USD pair rose sharply in the last hour and broke above the 1.33 mark. At the moment, the pair was trading at 1.3345, adding 0.23% on the day.

Did officials reach a Brexit deal?

The Telegraph recently reported that the British and the EU negotiators had reached a deal over the Brexit bill with both sides agreeing-in-principle on the €60 billion financial settlement. With the initial reaction, the GBP/USD pair gained more than 100 pips in a matter of minutes and refreshed its daily high at 1.3370. However, the pair struggled to extend its gains after a British government official told Reuters that they did not recognize the newspaper's account on the matter. Although the pair quickly erased a portion of its recent advance, the bullish momentum remains strong. 

A separate report published by the Financial Times also confirmed the Telegraph's claim. "Britain has bowed to EU demands and agreed to fully honour its financial commitments as identified by Brussels, removing one of the biggest obstacles to a Brexit divorce settlement," the FT wrote.

On the other hand, following a set of robust macroeconomic data from the United States, the US Dollar Index reached a two-day high at 93.18 in the session. Although the trade deficit in the U.S. widened, investors focused on the Conference Board's consumer confidence report, which revealed that the headline index rose to its highest level in nearly 17 years. Moreover, the S&P/Case-Shiller Home Price Indices released by the Standard & Poor's showed that house prices rose by 6.2% on a yearly basis in September.

In the meantime, speaking before the Senate Banking Committee, the Federal Reserve Chairman nominee Jerome Powell said that a December rate hike was appropriate. Commenting on inflation, Powell argued that it was still unclear whether the recent softness was transitory or not and added that they were going to continue to closely monitor the data.

Technical outlook

Valeria Bednarik, Chief Analyst at FXStreet, writes, "the pair entered bullish territory, now trading around 1.3350 and running, bullish on sentiment rather than on technical readings. 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 scope now to retest the weekly high at 1.3382, and even extend its rally this Wednesday, particularly if US data disappoint."

According to the analyst, supports for the pair could be seen at 1.3310, 1.3280, and 1.3240 while resistances align at 1.3380, 1.3420, and 1.3450.