GBP/USD bears can target 78.6% retracement at 1.2109

GBP/USD has been pressured as Parliament mutinies over the Prime Minister May’s Brexit plan. The pair has fallen from 1.3298 mid-Sep highs down to a low of 1.2507 this month so far. The UK Prime Minister Teresa May delayed the UK parliamentary vote with stating no definite date or time in future with chances of no-deal Brexit weighing heavily on Sterling that fell to a 20-month low. 

• Merkel: There will be no further Brexit negotiations

We have had news today that Merkel told May a deal could not be renegotiated and that Brexit Lawmakers in UK PM May's party have sent 48 letters enough to trigger a no-confidence vote in her leadership.

While the prospects of a second referendum and the idea that Britain may not even leave the EU should be supportive of sterling, it is the unknown that is hurting the UK currency and PM May's proclamation that the UK is leaving the EU. 

"Hanging over both political parties and the economies of the UK and the EU are the impending costs of uncertainty. A prolonged political dispute over the British departure or a no-deal Brexit would send the continent and the UK into recession," Joseph Trevisani, Senior Analyst at FXStreet explained. 

• Market themes of the Day: The judgment day for the Brexit deal in parliament delayed indefinitely
• The Revanchists of Brussels

Meanwhile, we have also seen a deterioration in data from the UK pouring gas on the fire. On the face of it though, today's jobs data was more healthy looking, and the BoE can delight on a stable wage growth outcome once again, beating expectations. 

"Admittedly, having been fairly stagnant for the past few months, the rate of jobs growth was better than hoped, with employment rising by 79,000 over the August-October period," analysts at ING Bank explained. "However, we struggle to see this more positive trend persisting in the short-run. There's also a risk that, as fears over 'no deal' build, consumers become more wary about the risks to job security - the latest dip in consumer confidence offers some tentative evidence this is already happening."

For those reasons, the analysts think economic momentum will continue to stall as we move into 2019. "The chances of a rate hike coming shortly after March are fading rapidly."

GBP/USD levels

Analysts at Commerzbank note that GBP/USD has eroded the bottom of its 4-month trading range and the 61.8% Fibonacci retracement of the 2016-2018 advance and the June 2017 low at 1.2593/57 (the November 2016, February 2017, and early April 2017 highs). "It has sold off to 1.2507, and this may offer some psychological support ahead of further losses. Below here targets the 78.6% retracement at 1.2109."