GBP/USD Forecast: Sterling Tests 1.2900 As Brexit Remains Stuck Between The Rock And The Hard Place

• The GBP/USD is trading little changed on the downside at around 1.2900 as the currency pair is trapped in a corrective move lower ahead of the UK Prime Minister May meeting European Commission President Juncker on Thursday.
• The European Commission President Juncker said that "We cannot abandon the idea that the Backstop has to be put in place", making any progress difficult.
• Mired with Brexit uncertainty, the Bank of England is expected to hold the monetary policy unchanged voicing Brexit concerns as a major economic risk for the UK.
• Break below 1.2900 on GBP/USD opens the way for a slide towards 50-DMA of 1.2800.

The GBP/USD is trading little changed on the downside at around 1.2900 on Thursday, the day of the UK Prime Minister Theresa May meeting the European Commission President Jen Claude Juncker in an effort to break through the Brexit deal stalemate while the Bank of England is expected to keep the monetary policy unchanged while releasing the February Inflation report.

The Brexit deal negotiations are going nowhere and the UK Prime Minister Theresa May meeting with the European Commission President Jean-Claude Juncker is not expected to bring any major breakthrough, especially in the most debated topic of the Irish border backstop.

The European Council President Donald Tusk was disappointed with the UK Prime Minister expecting concessions from the EU in the backstop while failing to come up with any new proposals last week and meeting European Commission’s Juncker might follow the pattern.

The UK Prime Minister and her Brexit is stuck between the rock and the hard place as the EU insists on the Irish border backstop while Brexit hardliners from within her own Conservative party refuse to pass the deal with the backstop in House of Commons.

The Brexit stalemate is weighing on Sterling that is testing 1.2900 level ahead of the Bank of England Monetary Policy Committee meeting that will also release the February Inflation report with the press conference of Governor Carney following the meeting.

The Bank of England Monetary Policy Committee (MPC) is widely expected to leave the Bank rate unchanged voicing the Brexit uncertainties as a key risk to the economic outlook for the UK while it also might lower the short-term inflation forecast. Overall, the Bank of England will stick to its one rate hike a year policy with May the most likely timing for the rate hike once the Brexit is successfully sorted. 

Technically the GBP/USD is moving within a corrective trend after breaking the psychologically important 1.3000 and 38.2% Fibonacci retracement line of 1.2970 on Tuesday.

The technical oscillators like the Relative Strength Index (RSI) and Slow Stochastics (SS) are both pointing lower with Slow Stochastics making a bearish crossover in the Overbought territory indicating future price declines towards 1.2900 level representing a 100-DMA on a daily chart and 1.2800 representing 50-DMA on a daily chart next. On the upside, the 1.2970-1.3000 levels are expected to hold as resistance lines.

GBP/USD daily chart