May is in trouble, and so is GBP/USD

• GBP/USD is trading below 1.3000, flirting with 6-week lows.
• The focus remains on Brexit, amid plots to oust PM May.
• The technical picture is quite bearish for the pair.

GBP/USD  is trading around 1.2980, close to the lowest levels since March 11th. It traded in a narrow range in the long Easter weekend and is now making its way down. US Dollar strength is part of the story, but Brexit also weighs.

Talks between the government and the opposition continued last week, but without yielding any results. Labour leader Jeremy Corbyn said that there is no agreement on a customs union. PM Theresa May is trying to balance between the pro-Brexit wing of her Conservative Party and those that support remaining or at least closer ties with the EU.

As Parliament reconvenes after a recess, there are fresh reports about attempts to oust the PM. A “senior Tory lawmaker” is reportedly behind the plot. According to party rules, MPs will have to wait until December to hold a vote of no-confidence. However, if a vast majority show May the door, she will have to walk out. The reports weigh on Sterling.

There are no events scheduled on the UK calendar, leaving the focus on  Brexit. In the US, New Home Sales are  forecast  to slide in March from the annualized level of 667K in February. Existing Home Sales, Building Permits, and Housing Starts all fell short of expectations.

All in all, politics are set to dominate.

GBP/USD Technical Analysis

GBP/USD lost the long-standing uptrend support line that accompanied it since mid-March. In addition, Momentum remains to the downside and the Relative Strength Index is leaning lower. All in all, the picture is quite bearish for the pair.

Initial support awaits at 1.2975 which was the low point in late March. A drop below this level will send the pair to the lowest since March 11th. Back then, cable hit a low of 1.2960. Further down, we are back to levels seen in mid-February. 1.2895 separated ranges back then. 1.2830 is next.

Initial resistance is at 1.3015 that was a high point in recent days. 1.3030 provided support in early April and now works as resistance. 1.3070 was a peak in mid-April, and 1.3125 capped cable several times during this month.