Above: European Council President Tusk has confirmed EU leaders have signed off on the Brexit deal. Image (C) European Union.

- GBP/EUR recovers by a cent to 1.1300

- Tough overhead resistance from multiple factors

- EU leaders agree to sign off Brexit deal

- For Euro inflation data likely key

The Pound-to-Euro exchange rate will open the new week at 1.1300 having managed to rally 0.5% in the week before.

From a technical perspective we are now at the key 1.1300 level where substantial resistance is located, and it could present the exchange rate with a 'glass ceiling’ that Sterling will struggle to break above.

The 50-week moving average (MA), 50-day MA and 200-day MA are all clustered just above 1.1300, and present a formidable obstacle lying in the way of more upside.

Institutional and private investors alike, often use major MAs to inform buying and selling decisions. This, and the fact they attract short-term technical traders looking to fade the trend, makes them tough levels to ‘crack’ and the site of many a reversal.

It is, therefore, quite possible the pair could pull-back from 1.1300 and resume it's downtrend, especially given the extremely bearish price action in the week before last, which saw the biggest losses for over 2 months.

A break below the 1.1200 lows would signal an extension down to the next level of support at the 1.1115 September lows.

Yet there is also still a case for expecting more upside from the exchange rate too, albeit a less compelling one from a purely technical standpoint.

It is arguable that the pair may have started a new short-term trend higher after completing a new sequence of peaks and troughs higher.

It is possible, if you look carefully enough, to just about discern the completion of two higher lows and two higher highs on the 4hr chart (see below) in the previous week when the exchange rate recovered from the 1.1200 lows up to 1.1300. This is often the first sign the short-term trend change.

Of course, this doesn't detract from the fact that there is a lot of resistance just above the current market level nor that the prior activity was extremely bearish either, it just shows there is an ember of hope for the bullish fraternity.

In order to forecast a change of the short-term trend with any conviction, however, I would want to first see a clear break above all the resistance outlined above, confirmed by a break through the 1.1350 level.

Until then I remain a bear.

Those with international payment requirements should note at the present time high-street banks are charging a rate in the 1.1080-1.1090 region, independent specialists are providing rates in the 1.12-1.1225 region. Those looking to make payments are advised to speak to independent specialists to both secure a competitive rate the delivers substantially more currency while also looking at how to protect against a potentially adverse move in Sterling over coming weeks.

The Pound: What to Watch

Brexit politics remain the main driver of the Pound but these appear to have moved on from a rather simplistic ‘deal’ or 'no deal’ duality to encompass risks of what might come beyond the signing of the Brexit deal by EU leaders Sunda.

European leaders Sunday endorsed the Withdrawal Agreement and Political Declaration on the future EU-UK relations.

The agreement comes after Spanish Prime Minister Pedro Sanchez revealed he would no longer vote against the Brexit deal, saying the UK and EU had agreed to demands for guarantees over the status of Gibraltar in future negotiations.

Even if a deal with Brussels is agreed it still needs to be voted through Parliament and based on current thinking that seems highly unlikely.

If it fails to get approved there is a risk of a general election or leadership challenge on Prime Minister Theresa May. Whether that could be held before the March Brexit deadline and what the result would be are all unknowns.

Given these headwinds Sterling is likely to remain under ‘the cosh’, yet there is also the likelihood that the endgame will almost certainly not result in a clear cut detachment of the UK from the EU.

In my view it is highly unlikely that anyone will dare allow any tampering with the Irish border even by subtle means because of fear it will jeopardise the hard-won Good Friday agreement.

Put simply, no politician will want to increase national security risks. As such the Pound will probably rally, eventually, on a ‘soft’ form of Brexit.

Consumers drive the lion's share of economic growth in the UK so probably the most important data release in the week ahead is Gfk Consumer Confidence for November, which is forecast to show a -11 print from -10 previously, and thus signal an increase in pessimism, when it is released on Friday at 1.01 GMT.

A deeper-than-expected decline might weaken the Pound.

Mark Carney, the governor of the Bank of England is also scheduled to give a speech on Monday at 19.30 GMT and this could also spark volatility for the Pound.

Recent data has been weaker-than-expected and market participants will be keen to know whether this has had an impact on Caney's views about monetary policy.

Other data releases in the week ahead include the CBI distributive trades survey, out on Tuesday at 10.00 and BOE lending data, including mortgage approvals and consumer credit, out at 10.30 on Thursday, November 29.

The Euro: What to Watch

The most important release for the Euro in the coming week is probably Eurozone inflation for November, out on Friday, November 30, at 11.00 GMT.

Economist forecast headline inflation to rise by 2.1% from 2.2% previously and core inflation to come out at 1.1% the same as in October. A deeper-than-expected slow down inflation growth that would be detrimental to the Euro.

Higher inflation increases pressure on the European Central Bank (ECB) to raise interest rates and this tends to appreciate the local currency. Higher interest rates attract and keep greater inflows of foreign capital, drawn buy the promise of higher returns.

Monday could also be an important day for the Euro. Four leading members of the European Central Banks governing council are scheduled to speak then.

These include Peter Praet, the ECB's chief economist at 10.00, Ewald Nowotny at 13.00, Benoit Coeure at 13.30 and Mario Draghi, the ECB's president at 15.00.

Given recent run of poor economic data including lower GDP growth in Q3 and and falling PMI’s, analysts will be scrutinising what the ECB officials say in great detail in order to determine whether it is likely the ECB decides to change it's monetary policy guidance.

If any of the speakers say that the ECB needs to delay reducing stimulus or increasing the negative deposit rate, which it is currently expected to do after the end of the summer in 2019, it will cause weakness for the Euro.

There is also a possibility they may discuss introducing a new tranche of another type of stimulus called targeted term refinancing operations also known as TLTROs, which are a form of liquidity injection offered to banks in the form of discounted loans.

If there is a chance of TLTROs being reintroduced the Euro will probably fall as it will be a defacto admission the ECB is not yet ready to withdraw stimulus.

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