GBP/USD Forecast: Three scenarios for today's two critical Brexit votes

• The PM's Brexit deal will likely win, but parliament may slow down the process.
• A dual victory for Johnson may send the pound higher.
• An instant failure would weigh on the pound but also open the door to remaining in the EU.

A sense of Déjà vu – is what many feel as parliament faces another critical Brexit vote – and it's a double vote this time. The House of Commons will have its first say on the Withdrawal Bill Act (WAB), which is the implementation of Prime Minister Boris Johnson's deal. MPs will vote on the WAB after House Speaker John Bercow denied the PM a general vote on the accord on Monday. 

The Meaningful Vote (MV) had already been debated on Saturday. Number crunchers across the British media have concluded that Johnson may have convinced enough members to support it. 

If it passes, the government will lay down the "motion program" – a critical procedural vote that aims to approve all relevant legislation within three days. That is designed to ensure the UK leaves the EU by the October 31 deadline. MPs will have had 24 hours to read the WAB before the initial vote, and the government will not provide an economic assessment.

Here, parliament may vote down the procedural vote, allowing more time for scrutiny and opening the door to delaying Article 50. It also raises the chances that amendments can pass, but that is a story for another day.

For the pound, there are three scenarios, each one with a different potential reaction for GBP/USD.

1) Vote passes, program motion fails – GBP/USD set to advance

As mentioned earlier, the PM has probably managed to convince just enough MPs to support the deal. The rejection of the Democratic Unionist Party (DUP) has failed to sway hardline Conservative Brexiteers to object the accord. Most of them – including the "Spartans" – have come around. On the other wing of the party, "rebel" members who worked to prevent a no-deal Brexit, are also supportive. A handful of Labour MPs that represent constituencies that voted Leave are also on board. 

Nevertheless, an affirmative vote is far from being guaranteed. If it passes, the pound is set to advance. However, MPs will likely prefer scrutinizing the deal and not be rushed over. The motion program may fail. 

This scenario has a high probability and will likely lead to gains in GBP/USD. It will provide some certainty that the House of Commons is ready to vote for Johnson's Brexit deal. While hurdles remain and the UK will leave after the deadline, it provides clarity. 

2) Instant fail – Pound plunges

In this scenario, pro-Remain MPs and several extreme hardliners will cobble up a majority to reject Johnson's deal – just like they did to his predecessor Thresa May. The magic number of 320 MPs in favor may not be reached.

The PM will likely call for new elections to break the deadlock. With his extension letter in the EU's mailbox, the opposition may come around to backing an election, which may occur in early December. Leaders will then convene to accept a three-month delay in Brexit until January 2020. There will be no need for the second vote.

In this case, which has a low probability, GBP/USD may tumble down. Markets see a higher chance of the first vote passing. 

3) Double pass – GBP/USD storms higher

In this scenario, Johnson's rallying cry of "Get Brexit Done" wins enough support to ram through legislation as fast as possible. It will raise the level of certainty that the UK leaves on October 31 and relieves Brussels of the need to approve an extension. 

MPs will still debate and suggest amendments to the bill, but it will have enough momentum, and markets will likely cheer the higher level of certainty. 

In this scenario, which has medium probability, GBP/USD is set to rally. 

Markets set to move also ahead of the vote

Overall, the next significant moves hinge on these critical votes, which are due from 18:00 GMT. 

The pound is set to move on speculation ahead of the event. Every statement from a so-far silent MP may move GBP/USD significantly. The debate in parliament begins at around 11:30 GMT. 

Beyond Brexit, there is little else moving currencies. Contradicting headlines related to US-Sino trade negotiations have left things balanced. No substantial data release is due today.

More Brexit drama does not deter the pound

GBP/USD Technical Analysis

The pound's rally is showing some signs of fatigue. The currency pair has dropped off the uptrend support line that has accompanied it since October 10. However, it trades above the 50, 100, and 200 Simple Moving Averages on the four-hour chart, and momentum remains positive. 

Resistance awaits at 1.2989, which capped cable last week. The fresh high of 1.3013 is the next level to watch. Further above, 1.3045, 1.3090, and 1.3135 are eyed. 

Support awaits at 1.2890, which was a stepping stone on the way up. Lower, 1.2800 is a round number and another temporary cap. 1.2750 was a support line last week, and 1.2706 was a swing high beforehand.