GBP/USD Forecast: Set for more losses as Brexit talks on the verge of collapsing

"The negotiations will probably end this week. [Irish Prime Minister Leo[ Varadkar doesn’t want to negotiate." That is the view from 10 Downing Street according to The Spectator. The British weekly' James Forsyth’s has been in touch with sources from Prime Minister Boris Johnson's team which now see a collapse in talks. Westminster insiders suspect that Dominic Cummings, the PM's strategist, is behind the briefing. 

The pound is losing ground and more may come.

They say that Ireland "became cold" after the UK opposition successfully passed the Benn Act – a law that obliges the government to ask for a delay to Brexit if parliament does not agree otherwise by October 19. The sources add that Ireland's veto is holding back other players in Paris and Berlin that may have been willing to compromise with the UK.

Perhaps the most incendiary part of the briefing is the threat to put countries that support a delay of Brexit "at the bottom of the queue" regarding British cooperation – including on defense. A delay remains the most likely scenario, but a veto by one of the 27 EU countries may trigger a no-deal Brexit. 

See Brexit: Three scenarios and GBP/USD price targets as B-Day approaches

The publication followed the EU's rejection of the UK's detailed Brexit plan. After Johnson said the EU failed to provide explanations for the dismissal of his proposals, the bloc leaked to The Guardian a long list of objections to his roadmap. These include risks to the integrity of the EU's single market and the need to erect physical barriers in Ireland – risking the peace in the Emerald Isle. 

Despite these low expectations, negotiations continue today in Brussels. David Frost, the PM's envoy, is leading talks with Chief EU Negotiator Michel Barnier. The French statesman previously said that Johnson will be to blame if talks fail. 

The Institute for Fiscal Studies (IFS) has warned that spending on a no-deal Brexit may send the national UK debt to levels last seen in the 1960s. 

Beyond Brexit

Andy Haldane, Chief Economist at the Bank of England, and his colleague Silvana Tenreyro, an external member of the Monetary Policy Committee, will speak later today. The BOE is considering its steps and also waiting for political development.

On the other side of the pond, Jerome Powell, Chair of the Federal Reserve, will speak later today and may shed light on the Fed's next move – to cut or not to cut interest rates later this month. 

More importantly, markets will follow news related to US-Sino trade talks ahead of high-level encounters on Thursday. China reportedly wants to strike a deal on topics it can agree on with the US, while delaying sensitive topics to next year. President Donald Trump – which remains embroiled in the impeachment inquiry – seeks a comprehensive agreement. 

The preparatory talks have been marred by the US announcement that it will blacklist 28 Chinese firms accused of human rights violations in Xinjiang. Beijing promised retaliatory measures. 

Overall, politics is set to dominate today's trading.

GBP/USD Technical Analysis

GBP/USD has lost the uptrend support line that accompanied it since the beginning of October. Moreover, momentum turned negative and the pair continues trading below the 50, 100, and 200 Simple Moving Averages.

Overall, bears remain in control. 

Support awaits GBP/USD at 1.2235, which was a swing low in early September. It is followed by 1.2205, which is October's low point. Next, we find 1.2155, which cushioned cable in August. 

Resistance awaits at 1.2275, which worked as support in late September and early October. 1.2245 capped GBP/USD in late September, while 1.2390 separated ranges earlier that month. It is followed by 1.2415, October's high.