GBP/USD: Skepticism Over Cross-Party Brexit Talks

After posting strong gains on Friday, the GBP/USD pair started the week with considerable losses but managed to regain some positive traction during the Asian session on Tuesday. The pair touched an intraday high level of 1.3131 and the main driver for the upliftment was a modest US Dollar weakness. Bulls, however, lacked strong conviction for an extension of the uptick, with a combination of forces prompting some fresh selling at higher levels.

As traders returned after a May Day holiday in the UK, persistent Brexit uncertainty and the lack of progress in the UK cross-party Brexit talks kept a lid on any follow-through up-move for the British Pound. This coupled with the UK political chaos, wherein MPs want the UK PM Theresa May to step down post-EU elections on May 23, might add to Brexit complexities and seemed to dent sentiment surrounding the Sterling.

The pair slipped back below the 1.3100 round figure mark (50-day SMA) and was further weighed down by a modest pickup in the USD demand amid the recent escalation in the US-China trade tensions. There aren't any relevant market moving events/data lined up for the day, leaving the pair at the mercy of any incoming Brexit/trade-related headlines and the USD price dynamics. Later during the US trading session, comments by the Fed Governor Randal Quarles and BoE Chief Economist Andy Haldane may have a mediocre effect on the pair and produce some short-term trading opportunities.

From a technical perspective, nothing seems to have changed much except that the pair has been facing some difficulty in making it through the 1.3140-50 resistance - marking 23.6% Fibonacci retracement level of the 1.2396-1.3381 up-move. Hence, it would be prudent to wait for a sustained move beyond the mentioned barrier before positioning for any further near-term appreciating move towards the 1.3200 round figure mark. Subsequent resistance awaits near the 1.3260-70 region, above which the pair seems all set to reclaim the 1.3300 handle.

On the flip side, immediate support is pegged near the 1.3050-45 region, which if broken might accelerate the slide back towards challenging the key 1.30 psychological mark. The latter coincides with a confluence support - comprising of 100-day SMA and 38.2% Fibonacci retracement level, and should act as a key pivotal point for the pair's next leg of a directional move.

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