GBP/USD is mixed as a Brexit deal is still on a knife edge ahead of the FOMC and BoE

• GBP/USD is trading 0.18% higher despite a recent move lower.
• There was also a rejection of a trendline on the hourly chart.

Fundamental backdrop – A Brexit deal is hanging in the balance

Last week we saw the eighth round of negotiations end in disaster yet again with both parties saying talks had stalled. The main sticking point at the moment is if the UK will go back on their word over the customs territory in Northern Ireland. The Internal Market Bills is currently working its way through the House of Commons and the House of Lords. At the moment it is not clear if the bill will pass but if it does it will break international law. A deal could still be possible but this could represent a lack of trust and could impact the future of the relationship between the EU and UK. 

This week the market will get the latest from both the Bank of England and US Federal Reserve. This will be sure to inspire some volatility. Of the two, the BoE has been sounding more dovish speaking about the possibility of negative interest rates and more QE. The Fed, however, have been asking for more fiscal support but the White House have been stalling for weeks as the Democrats and Republicans are at odds with each other over the amount and usage of the additional cash. Analysts will be looking for more clarification on the Fed’s new targeted employment levels and inflation goals. 

Technical picture – Trendline rejection sends the price lower

The 1-hour chart below shows the extent of the downtrend in cable. The price has moved around 4.5% lower from the highs on the chart but the 1.2762 low did prove to be a decent support level. The main feature on the chart is the downward sloping trendline and the price bounce off it once again and sold off. There has been one higher low and higher high wave but the price will need to break the trendline once again for the reversal to gain momentum. On the topside, bulls will need to watch out for the red resistance line at 1.2920 as it has been used three times already. 

Additional levels