GBP/USD: Sterling In Corrective Mode As Chances Of Renegotiating Brexit Deal Remain Low

• The GBP/USD is trading little changed on the downside at around 1.3070 after the UK parliament voted for amendment appointing the government to re-negotiate the Brexit deal with the EU.
• Goldman Sachs analysts increased chances of a no-deal Brexit to 15% from 10% prior to UK parliament vote.
• The GBP/USD is in correction mode facing strong support at 1.3000 ahead of the Federal Reserve meeting later on Wednesday.

The GBP/USD slumped to 1.3050 from 1.3200 intraday high on Tuesday after the UK parliament voted in Brady´s amendment appointing the UK government to re-negotiate the Brexit deal with the European Union. The GBP/USD remains in a corrective mode lower on Wednesday trading little changed on the downside at around 1.3070 with further moves driven by the Us Federal Reserve´s stance toward future of the interest rate hiking in 2019.

While the chances of the UK government to re-negotiate the Brexit deal are low, the no-deal fear factor is driving the GBP/USD lower, with the Goldman Sachs analysts increasing their “no-deal” Brexit probability from 10% to 15% after the vote and cut their probability of Brexit not happening at all to 35% from 40%.

The UK government officials remain optimistic with the UK Brexit Minister Barclay saying there are a number of options including time-limited Irish border backstop.

The key risk event of the day remains the US Federal Reserve meeting later on Wednesday with the policymakers widely expected to keep the interest rates unchanged while stressing the ¨patience¨ stance in terms of the future policy outlook. While traders already priced in a low probability of any rate hike in the US in 2019, the balance sheet reduction topic is set to drive the market. 

While no immediate change to Fed´s balance sheet reduction is expected, any hints for slowing the process down from the Fed are likely to weigh on the US Dollar. For details read Yohay´s Preview here.

Technically the GBP/USD jumped above downward sloping trendline and by breaking above 1.3000 it has also conquered the major resistance line representing 38.2% Fibonacci retracement of the upmove from 1.2130 to 1.4177.

The technical oscillators including the Relative Strength Index and Slow Stochastics are both elevated with Slow Stochastics making the bearish crossover in the Overbought territory. The GBP/USD rose to a fresh 15-week high of 1.3214 earlier this week and the GBP/USD is set to experience the further corrective pullback. The bullish breakout of the Fibonacci level of 1.2990-1.3000 becomes a support level now and the first price target on the downside.  On the upside, the immediate resistance is at around 1.3150.

The GBP/USD daily chart