GBP/USD Forecast: Sterling Hammered Lower By Brexit Draft Further Downside Limited

The GBP/USD is trading little changed on Thursday after the currency pair has experienced sharp selloff in last two days driven by both Federal Reserve chairman Jerome Powell’s optimistic outlook for both the US economy and interest rate hikes and the Brexit related jitters with the EU’s draft of the Brexit withdrawal bill being rejected by the UK officials as unacceptable.

The GBP/USD is now trading within broad bearish trend channel sloping downwards and the pair needs to break below 1.3737 support line represented by 38.2% Fibonacci retracement line of the upmove from 1.2770 to 1.4343 to confirm further weakness.

The UK Prime Minister Theresa May is now standing on a crossroad of having to solve the free-trade deal and the Irish border puzzle while running a tiny majority at home in the UK parliament. Theresa May either betray the opinion group of 62 lawmakers led by hardliner Jacob Rees-Mogg and face a no-confidence vote that if she wins, will strengthen her domestic leadership position and will promote the Pound. On the other hand, she is facing a strong group of Labour party MPS that want to keep the customs union with the EU. As the time is running out for Theresa May to reach the free trade deal, the GBP/USD is increasingly looking to be a subject of Brexit related swings.

The UK domestic data front is not helping Sterling a lot with the UK manufacturing PMI decelerating to 55.2 in February, although it came out a bit better than expected.

Technically, the GBP/USD is still moving within broad bearish channel downtrend and the pair needs to break below 1.3737 to confirm further downside potential. Momentum is returning back to neutral on 1-hour chart and after another wave of GBP/USD selloff on Wednesday, the Relative Strength Index is just above the Oversold territory.

GBP/USD 1-hour chart