GBP/USD Forecast: Sterling in crossfire of liquidity drain and Brexit deal resonance

• The Brexit agreement is out with UK government standing behind Prime Minister May, but Brexit Secretary Raab steps down.
• The question is if Theresa May is able to get the Brexit agreement postponing the Irish border solution passed in parliament and survive a potential no-confidence vote.
• The final stage of Brexit negotiations roils currency markets with Sterling.

It is a crazy, crazy trading session yesterday and today with Sterling with abrupt swings of 100 pips up and down as the market mood swings surfing the endless flow of Brexit headlines.

The GBP/USD is under pressure trading down 1.2% at around 1.2850 after the UK Brexit Secretary Dominic Raab stepped down just one day after the Brexit agreement negotiated between the UK and the EU.

“Today, I have resigned as Brexit Secretary. I cannot in good conscience support the terms proposed for our deal with the EU,” Dominic Raab said on Thursday morning indicating that there is an ongoing dispute within the UK Cabinet about the Brexit deal. 

After striking the Brexit deal the European Summit is going to be assembled next Sunday, November 25. The reason for the European summit assembled for Sunday is either because it is going to be the ceremonial end to lengthy negotiations, or because it is going to be a disaster and politicians opted for off the market hours. 

One way or the other, the GBP/USD is a nuclear blast trading within the broad range of 1.2827-1.3070 in last three days. And the volatility is not over with Theresa May facing a no-confidence vote.

Theresa May is going to face a no-confidence vote only if 48 letters are collected, the level which hasn't been reached until today. And then 159 members of parliament would need to vote against May to oust her.

The GBP/USD currency pair continues to build a base just below the downward sloping trend on a daily chart. The daily swings are massive over the course of last three days with daily ups and downs of 1% framed by 1.2827 on the downside and 1.3070 on the upside while the currency pair settled at mid 1.2800s. With Brexit deal about to be approved, the potential for the upside mounts as the Momentum and the Relative Strength Index both remain in the neutral while Slow Stochastics is set to make a bullish crossover on a daily chart. Moreover, the golden cross of a 
50-day moving average crossing over a 100-day moving average to the upside was formed on a daily chart indicating final trend reversal targeting 1.3060 before moving to 1.3380 and 1.3460 important Fibonacci level. Failure of Brexit deal to materialize should see GBP/USD fall towards 1.2900 first before testing 1.2830 next.

GBP/USD daily chart