- GBP.USD is reeling from yet another failed round of Brexit votes.
- The ball is now in the hands of the cabinet, 10 days to go.
- The technical picture is decidedly bearish for cable.
GBP/USD is on the back foot, trading closer to 1.3000. In the second round of indicative votes, the UK Parliament rejected all the four options that were on the table. The closest was a motion on a Customs Union, that lost by only three votes. A second referendum motion lost by 12 votes. Both parties suffered from rebellions against the official decisions by their leaders.
Labour saw MPs from Leave constituencies voting against the options for a soft Brexitwhile the ruling Conservative Party saw pro-Remain MPs supporting these options. The impasse is good news for PM Theresa May. After the House of Commons rejected her Brexit deal three times, it was also unable to challenge her and suggest other options.
The ball passes to May’s court for today. She will chair a lengthy cabinet meeting to decide what to do next, only ten days ahead of Brexit Day, April 12th. She will likely to try to find a way to pass her deal in a fourth vote, but it is hard to see a majority for it. Asking for a long extension or fresh elections are potential options, but she would struggle to muster support from Brexiteers that could quit the government. If she goes for a no-deal Brexit, her pro-Remain ministers such as Chancellor Phillip Hammond could quit. It’s a tough spot.
Fears of a no-deal Brexit have increased, weighing on the pound. Chief EU Negotiator Michel Barnier said that if the UK leaves without a deal, it will be the UK’s fault. The blame game does not help Sterling.
Every piece of news from the cabinet meeting is set to move GBP/USD today but there are a few other things worth noting.
Markit’s UK Construction PMI is projected to remain below 50, indicating a slight contraction in the sector. The Manufacturing PMI released on Monday surprised to the upside with 55.1 points, but this is partly due to stockpiling in fear of a cliff-edge Brexit.
In the US, Durable Goods Orders are eyed and they may not be that great. See: US Durable Goods Preview: Following retail lower?
Monday’s American data was mostly positive. While February’s Retail Sales numbers disappointed with drops, upwards revisions for January balanced the picture. In addition, the forward-looking ISM Manufacturing PMI increased, showing the resilience of the US economy.
GBP/USD Technical Analysis
The GBP/USD four-hour chart shows a clearly bearish picture. Momentum is to the downside and the Relative Strength Index is also leaning lower without showing oversold conditions. The 50 Simple Moving Average crossed the 200 SMA to the downside, another bearish sign.
Some support awaits at 1.3020, the fresh low. 1.2980 is the next line to watch. It was a low point on Friday. 1.2960 was the low point in March and losing it opens the door to 1.2895 that dates back to February. 1.2830 is next.
1.3150 is upside resistance after holding cable down on Monday. 1.3270 was the high point last week and 1.3330 was a swing high beforehand.