GBP/USD Forecast: Bulls are taking over as Labour debates second referendum

GBP/USD is extending its gradual recovery, trading closer to 1.3000 than to 1.2900. The US Dollar has been on the back foot on Monday amid weak inflation data. The Core PCE Price Index disappointing with a deceleration to 1.6% YoY, ahead of the Fed decision on Wednesday. The figure raises the chances for a more dovish tone.

See Fed Preview: The good, the bad, and the ugly factors that determine the dollar's reaction

US data released today includes the Employment Cost Index, Pending Home Sales, and the Conference Board's Consumer Confidence gauge, which is projected to advance. 

See CB Consumer Confidence Preview: Warranted Optimism

In the UK, Brexit is not on the official agenda of the House of Commons. However, the Labour Party's internal committee will decide today if to support a second referendum in talks with the government, and if so, under what conditions.

The opposition, like the ruling party, is torn between various factions. A resolution to support a second referendum would increase the chances of no Brexit at all and would be cheered by markets. However, political analysts expect a "fudge": a mixed decision that would leave the option of another vote in the air.

GBP/USD Technical Analysis

GBP/USD is now trading above 1.2960, the low point in March and the line that rejected a recovery attempt last week. On its way up, the pair also broke above the 50 Simple Moving Average, and Momentum turned positive. Things are looking better.

Resistance awaits at 1.3025 that was a high point last week. The next line to watch is 1.3130 that held cable down in mid-April. 1.3200 is a round number and also worked as resistance earlier in the month.

The first support line to watch is 1.2920 that provided temporary support in recent days. 1.2870 was the low point last week and the lowest in two months. 1.2830 and 1.2775 are next.