GBPUSD Gains, But Faces Significant Headwinds Ahead of FOMC and BoE Decisions

Summary:

The GBPUSD is trading higher for the 2nd day in a row, but only just as it faces significant Brexit-related headwinds ahead of the BoE and FOMC decisions.

The GBPUSD pair is off intraday highs as the controversy surrounding the Internal Markets Bill continues. The GBPUSD is now trading at 1.28969, or about 27 pips off intraday highs, as intraday selling of the US Dollar allows the battered Pound to gain traction as it strives to make it the 2nd day of gains in a row. This comes as fears of a no-deal Brexit reach a crescendo with less than four months to the deadline of the transition period.

The controversial Internal Markets Bill has cleared the first reading in the UK House of Commons. The controversial bill violates aspects of the Brexit Withdrawal Agreement and has prompted a warning from the EU that passage of the bill into law would be the end of negotiations; which would inevitably lead to a no-deal Brexit. This situation presents a significant headwind to any Pound advance, which could be just temporary in the circumstances.

Hitherto, the Pound received some intraday boost from positive Claimant Count figures. The number of claims for unemployment-related benefits was lower than expected (73.7K as against a consensus of 100K). A downward revision of last month’s number from 94.4K to 69.9K reinforced the sentiment.

However, investors are refraining from making aggressive bets as key decisions on the interest rates from the FOMC, and the BoE are due this week.

Technical Outlook for GBPUSD

This week’s gains on the GBPUSD have come from a bounce on the ascending trendline support which connects the lows of 18 May, 30 June and 11 September 2020. The upside move is about to challenge the resistance posed by the 1.29469 price level (lows of 6 March and 30 July). Only a break above this level and the minor resistance at 1.29932 would allow the GBPUSD access towards the pathway leading to 1.31754.

However, if the bearish sentiment takes over once more, then 1.29469 may serve as the rejection point for any further advance on the pair, which brings in 1.28589 and 1.27558 as potential support targets. However, only a breakdown of the ascending trendline support would grant sellers access to these price levels.

The FOMC and BoE rate decisions and statements would play a pivotal role in the price action on the pair as the week winds down.