GBP/USD under tension as Brexit and Fed chatter pull the pair apart

GBP/USD is trading tightly with recent peaks, shuffling feet near 1.2780 as the Cable continues to mix just beneath the critical 1.2800 handle, with Brexit concerns back in full view and a dovish-sounding FOMC sending the Greenback for a ride on Wednesday.

PM May has three days to find alternative if Brexit deal fails - Reuters

Brexit tensions are mounting ahead of January 15th's parliamentary vote on Prime Minister Theresa May's unloved Brexit withdrawal agreement, and UK MPs continue to play hardball with the PM, voting by a close majority that PM May's government only has three days following a failed vote to produce an alternative plan, an outcome which is looking just as likely as it did in December, when Mrs. May first pulled her deal from a vote for the first time.

On the Dollar side, several Fed heads and the FOMC itself appeared far more dovish than markets were expecting, as Fed officials continue to talk up the idea of a stall in the Federal Reserve's path of rate hikes, sending the US Dollar roiling against broader markets on Wednesday, but ever-present Brexit angst has kept the Cable from making much progress.

Thursday sees only mid-tier data for the UK, with the Bank of England's (BoE) Credit Conditions Survey due at 09:30 GMT, while the US side sees yet another Fed appearance, with Fed chair Jerome Powell slated for a speech at 17:00 GMT, and traders will be bracing for further dovish overtones to knock the Dollar lower.

GBP/USD Levels to watch

The Sterling is trading under significant tension, with market pressures on all sides tearing the Cable pair apart as the Pound's Brexit troubles and the US Dollar's Fed wobble leave GBP/USD tightly-coiled, as noted by FXStreet's own Valeria Bednarik:

The pair traded as high as 1.2803, finding it hard to extend its gains beyond the 1.28 mark amid Brexit woes. The short-term picture, however, offers a positive technical stance, as in the 4 hours chart, the pair is holding above its moving averages, while the 20 SMA firms up above the 200 EMA, this last acting as dynamic support at around 1.2720. The Momentum indicator is heading nowhere right above its mid-line quite neutral, while the RSI advances around 64, favoring further gains on a break above 1.2815, December 31st high and the immediate resistance.

Support levels: 1.2755 1.2720 1.2680
Resistance levels: 1.2815 1.2850 1.2895