GBP/USD Forecast: Brexit summit unlikely to end in a deal done weighs on Sterling

• The GBP/USD closed the gap on the downside after the weekend abrupt end to Raab-Barmier meeting.
• The EU diplomats say that this week’s Brexit summit may not produce a Brexit breakthrough.
• The GBP/USD will face the Trinity on major UK macroeconomic indicators including labor market report, UK inflation and retail sales.
• The GBP/USD needs to break the confluence resistance of 1.3103 representing a 100-day moving average and the 38.2% Fibonacci retracement of a move from 1.4377 to 1.2662 to move lower targeting 1.3030 and 1.2970 further down.

The GBP/USD is trading flat at around 1.3150 on Monday after the currency opened the session with the gap on the downside. Sterling was negatively affected by the abrupt end of the UK Brexit Secretary Dominic Raab meeting with the European Union chief Brexit negotiator Michel Barnier on Sunday with talks stuck in a stalemate, raising the risk of Brexit summit ending with failure this week. 

Moreover, the European Union diplomats said on Monday that his week’s Brexit summit may not produce a Brexit breakthrough. The Brexit summit is scheduled for October 17-18 with the issue of the Irish border being basically the thorniest one.

While the original plan for the Brexit summit probably was to declare a gradual path towards the deal in November by the European Union leaders, the markets will have to price in more of Brexit uncertainty now.

Technically, the GBP/USD closed to gap on the downside after opening at 1.3085 on Monday and rose to 1.3150 level, reaching last week’s close. The build-up of Brexit uncertainty is likely to weigh on Sterling further as the UK most important macroeconomic indicators are likely to deliver the picture of decelerating wages, inflation and retail sales falling back into negative in September.

The technical oscillators are pointing upwards on the 1-hour chart, but the GBP/USD broke from the upward trending channel last week and now it trades in a sideways trend with likelihood Brexit talks failure weighing on the currency pair pushing it lower. The GBP/USD needs to break the confluence resistance of 1.3103 representing a 100-day moving average and the 38.2% Fibonacci retracement of a move from 1.4377 to 1.2662 to move lower targeting 1.3030 and 1.2970 further down.

GBP/USD 1-hour chart