GBP/USD eyes a break below 1.2000 in the lead up to Brexit showdown

With no Brexit solution in sight, GBP/USD remains under pressure ahead of the much-awaited resumption of the British Parliament. The quote seesaws near 1.2030 while heading into the London open on Tuesday.

In addition to the early-day headlines suggesting the Brexit negotiator’s dislike for the EU’s refrain from altering Irish backstop, as conveyed by the BBC and the UK Telegraph, the Cable bears the burden of overall US Dollar (USD) strength as the US traders will return to their desks after an extended weekend.

Ever since the United Kingdom’s (UK) Prime Minister (PM) Boris Johnson announced to prorogue the parliament, British politicians raged in anger indicating it as a clear sign of a no-deal Brexit. Due to this, an alliance formed by Labour, Liberal Democrats and other opposition parties as well as some Tory rebels will put forward a motion to win over the Commons’ support for a bill that would require the PM to seek Brexit extension till January 31 if he fails to get a deal with the EU before October 19. Another aspect of the bill, as conveyed by the Independent, says that the PM Johnson must seek another Brexit date from the EU in a case the bloc rejects 31 January deadline unless the Commons rejects it.

In a reaction to this, the UK PM has already threatened to call a snap election on October 14, the motion on which will be passed for a vote on Wednesday, if he fails in today’s crunch vote.

Hence, an enormous amount of political drama awaits the UK’s Parliamentary open after a long summer recess.

Other than the politics, UK’s August month Construction Purchasing Managers’ Index (PMI), 45.9 expected versus 45.3, will also gain the Cable traders’ attention.

On the contrary, headlines concerning the US-China trade stalemate and manufacturing PMIs from the US will also welcome the US traders’ after an extended weekend.

Technical Analysis

With the clear break of immediate support-line and sustained trading below four-month-old falling trend-line, the GBP/USD pair is likely to aim for 1.2000 round-figure with the August month low of 1.2015 be the close support. In a case prices keep trading southwards below 1.2000, the year 2017 low near 1.1987 and the year 2016 low near 1.1800 will be in the bears’ radar. Meanwhile, 1.2100 and 21-day simple moving average (DMA) near 1.2144 act as nearby resistances for the pair traders to watch during pair’s U-turn.