GBP/USD forecast: Bearish bias remains, sustained break below 1.2100 handle awaited

• The latest optimism over softer Brexit turned out to be short-lived.
• The USD gains traction following the release of July FOMC minutes.
• Thursday’s key focus will be on Johnson’s meeting with Macron.

The GBP/USD pair failed to capitalize on the previous session's solid bounce of over 100-pips and came under some renewed selling pressure on Wednesday, weighed down by persistent uncertainty about Britain's exit from the European Union (EU). The latest optimism over some EU concessions to avoid a no-deal Brexit turned out to be rather short-lived after German President Frank-Walter Steinmeier told reporters that it was unlikely that the negotiations on the backstop will get going again. This was followed by comments from German Finance Minister Scholz that no one should expect any changes to the Brexit Deal and prompted some fresh selling around the British Pound.

Stronger USD adds to Brexit-led selling

The pair dropped back closer to the 1.2100 round figure mark and was further pressurized by a modest uptick in the US Dollar, which extracted some support from a goodish pickup in the US Treasury bond yields. The greenback got an additional boost following the release of minutes of the July 30-31 FOMC meeting, which echoed the Fed Chair Jerome Powell’s post-meeting message that the 25 bps rate cut was a mid-cycle adjustment and not the start of a lengthy easing cycle. The minutes tempered expectations for an aggressive monetary easing by the Fed, though the market reaction turned out to be rather muted as investors preferred to wait for the Fed Chair Jerome Powell's scheduled speech at Jackson Hole on Friday before placing fresh directional bets.
 
Moving ahead, market participants now look forward to a Brexit-related meeting between the UK PM Boris Johnson and French President Emmanuel Macron for a fresh impetus. Given that Macron had said on Wednesday that there would be no renegotiation of the terms for Britain's exit from the EU, the meeting seems unlikely to provide any meaningful respite for the GBP bulls, rather any negative headlines will be enough to prompt some fresh selling around the Sterling and turn the pair vulnerable to resume its prior/well-established bearish trend.

Short-term technical outlook

From a technical perspective, the pair has been recovering steadily along a short-term ascending trend-channel formation on hourly charts. Against the backdrop of the recent fall, the mentioned channel constitutes towards the formation of a bearish continuation - flag chart pattern - clearly indicating that the near-term selling pressure might still be far from being over. A convincing break through the channel support - currently near the 1.2100 handle - will reaffirm the bearish set-up and turn the pair vulnerable to accelerate the slide back towards challenging the key 1.20 psychological mark.
 
On the flip side, any attempted recovery might now confront some fresh supply near mid-1.2100s, above which the recovery could get extended - albeit seems more likely to remain capped near the top end of the trend-channel - currently around the 1.2200 round figure mark. Only a sustained breakthrough the mentioned barrier would negate the near-term bearish outlook and prompt a short-covering bounce immediately towards the 1.2245-50 supply zone.