GBP/USD Forecast: Unconvinced by three efforts to block a hard Brexit – more falls possible

"Do or die" – Boris Johnson's words on leaving the EU by October 31st – and now the pro-Remain camp has begun fighting in earnest.

A group of MPs has lodged a court case meant to prevent prime minister Johnson to bypass parliament to force a no-deal Brexit. A judge has set the hearing for September 6th – three days after parliament returns from the summer break.

A second development comes from House of Commons Speaker John Bercow. The colorful character has vowed to "fight with every breath" to stop Johnson from closing parliament. 

And the third move comes from former Chancellor of the Exchequer Phillip Hammond – that has raised his rhetoric by saying that a no-deal Brexit would be a "betrayal of the referendum result." The senior politician and 20 MPs have sent a letter to the PM and said they are alarmed by his red lines which "appear to eliminate the chances of reaching an agreement with the EU."

The pound has been unimpressed by these efforts as the clock ticks down to Brexit – 78 days to go. 

Sterling did receive a short-lived boost from rising inflation. The Consumer Price Index rose by 2.1% YoY in July – above expectations for a drop from 2% to 1.9%. The uptick raises the chances for a rate hike by the Bank of England – assuming a smooth Brexit.

The rise in inflation is eroding some of the gains in salaries. On Tuesday we learned that wage growth has accelerated to 3.7% year on year and 3.9% excluding bonuses – the latter figure beating expectations. Overall, the UK job market remains healthy. While the unemployment rate has risen from 3.8% to 3.9% in June, it remains low.

On the other side of the pond, the US dollar received a boost from a reprieve in trade wars. President Donald Trump decided to delay imposing tariffs on some Chinese products from September 1st to December 15th – a relief for shoppers. The U-turn has been received positively by markets and lowered the chances of a rate cut by the Fed.

Moreover, the world's largest economies confirmed they will hold face-to-face trade talks in September. Further tweets from Trump and comments from Beijing may move markets.

Overall, politics are set to dominate trading once again.

GBP/USD Technical Analysis 

GBP/USD has been trading in a downtrend channel since early August when it hit a high of 1.2250, marking the beginning of the downtrend resistance line. The pair has since hit a low of 1.2015 which defined the downtrend support line. 

Cable continues trading below the 50, 100, and 200 Simple Moving Averages and suffers from downtrend momentum – bearish signs.

Some support awaits at 1.2040 which has been a low point in recent days. The 2019 low of 1.2015 is next, and it is closely followed by the round number of 1.2000 and the 2017 low of 1.1985.

Looking up, resistance awaits at 1.2100, which has held the pound down this week and provided support last week. 1.2155 was a high point on Friday, 1.2210 capped last week, and 1.2250 is the post-crash high.