GBP/USD Forecast: Hammered by Yellowhammer and careful about Corbyn

• GBP/USD has been slipping back amid fears of a hard Brexit.
• Both Conservatives and Labour are preparing for an early election.
• Monday's technical chart is mixed for GBP/USD.

Pound traders have no time for the yellow sand on the beach – as the Project Yellowhammer document reveals significant damage from a no-deal Brexit. The leaked dossier – compiled by prime minister Boris Johnson's cabinet office – is pointing to shortages in food, medicine, and fuel if the UK leaves the EU without a deal. Moreover, the paper foresees disruption to ports and a hard border Ireland. The fresh gloomy prospects weigh on the pound and also fueled the opposition in its desire to stop such a scenario.

Opposition and Labour leader Jeremy Corbyn has stated he will do "everything it takes" to prevent a hard exit and confirmed he will call a motion of no-confidence. Corbyn is counting on the support of the Scottish National Party (SNP), the Liberal Democrats, and also a handful of Conservative MPs that vehemently reject a no-deal Brexit.

However, some of them will find it hard to hand the keys of 10 Downing Street to the radical left leader – even for a short time. When asked by a reporter, Corbyn said he would not step aside to allow another MP to serve as the head of a national unity government. 

The aspiring PMI's speech has encompassed a wide array of topics and sounded to many as a preparation for an election. The current PM has also been examining the options for an early poll according to reports. Johnson has been consulting pollsters and campaign experts. The freshly installed PM will have a break from domestic politics as he goes on a European tour.

He will meet French President Emmanuel Macron and German Chancellor Angela Merkel – but a breakthrough is unlikely. The UK and the EU are divided on the thorny issue of the Irish backstop. The EU says it must stay and the UK refuses to negotiate under these conditions.

In the US, President Donald Trump and his economic adviser Larry Kudlow have expressed optimism about reaching a trade deal with China and about the strength of the US economy. Their comments came after a jittery week in stock markets. Fears of a recession grew after the yield curve inverted, and as both China and Germany reported disappointing numbers. 

On the other hand, UK figures have all been upbeat last week, with increases in wages, inflation, and retail sales. This week is light on economic indicators, leaving the stage for Brexit and trade to dominate moves.

GBP/USD Technical Analysis

GBP/USD continues enjoying upside momentum on the four-hour chart. Cable is also supported by the downtrend line that it broke above last week, but this is looking weak. The pair is trading between the 50 and 100 Simple Moving Averages but remains below the 200 SMA. All in all, the picture is mixed.

Support awaits at the round number of 1.2100 which has capped the pair during August and converges with the 50 SMA. Lower, 1.2040 provided support last week and serves as the last defense before the 2019 low of 1.2015. The next lines are 1.2000 and 1.1985.

Some resistance awaits at 1.2160 which capped GBP/USD late last week. It is followed by 1.2210 that held it down earlier in August, and by the post-crash low of 1.2250.