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GBP/USD set for a break lower from 1.2500 as Brexit evolution continues

  • With the Brexit deal's parliamentary vote officially delayed, PM May now has to survive an onslaught of no-confidence letters.
  • May's spokesman said that the delay could last up to six weeks, but May's cabinet may not have that long.

As GBP/USD trades into the 1.2500 critical level heading into Wednesday's London market session, Brexit continues to hang over the Cable like a cloud, and Prime Minister Theresa May's decision to pull her Withdrawal Proposal at the last moment is drawing plenty of ire, and risk sentiment continues to skew towards the downside as May's hopes of pulling any eleventh-hour concessions out of the EU are looking slim.

Sterling falls to new 2018 low with lower targets on rumors of May facing a no-confidence vote

The current Brexit landscape has come a long way in the last 48 hours, with the tense run-up into PM May's parliamentary vote on her current (ad likely only) divorce proposal giving way to what amounts to a wheel-locked waiting period: one of May's spokespeople noted that the House vote on May's Brexit deal could be postponed for up to six weeks, and while May's withdrawal initially saw a glimmer of hope that she would head to Brussels in an effort to secure any last-minute concessions that would help her win over any of the nay votes on her home turf, Angela Merkel dashed those hopes in short order, and now the UK headings into the mid-week inflection point with no vote, no deal, and no talks.

Wednesday will be clean of UK economic data, and Thursday will be likewise empty, with only RICS Housing Prices on the docket early Thursday at 00:01 GMT, well before the London markets open, and the clear lack of actionable figures will see the Cable facing down a steady stream of Brexit headlines, and Prime Minister May is now faced with the growing reality that a no-confidence vote in her government may be much closer than she's prepared for; 48 letters of no-confidence are required to trigger the process of unseating the PM, and while we don't have an exact count of how many have been delivered, it's safe to say that the count likely sits far closer to the critical number than PM May is comfortable with.

GBP/USD Levels to watch

Cable bears are really beginning to put the rubber to the road, according to FXStreet's own Valeria Bednarik: 

The pair is down for a sixth consecutive week but there are no signs of downward exhaustion, neither of an upcoming change in the current downward trade. The pair is trading below Monday's closing level and posted a lower low and a lower high daily basis, signaling bears hold the grip tight. In the shorter term, and according to the 4 hours chart, the risk is also skewed to the downside, as the 20 SMA accelerates south well above the current level, while technical indicators quickly resumed their declines after correcting oversold conditions, now maintaining strong downward slopes.

Support levels: 1.2490 1.2465 1.2430
Resistance levels: 1.2550 1.2590 1.2640 

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