GBP/USD supported on downside, but how fragile is that structure?

GBP/USD moving back to the downside on realistic prospects of a hard Brexit.
GBP is so far buoyed by prospects of an alternative in May's Plan B and hopes that Europe will budge.
GBP/USD is currently trading at 1.3064, down from 1.3122, slightly up from 1.3053.

Yesterday was a page turned-over for a new chapter in the Brexit saga and sterling has tailed off, moving in synch with the market's rethinking and back in tow of blatant downside risks of a no deal Brexit.

The House of Commons passed two amendments yesterday. First, a non-binding statement that a no-deal outcome is unacceptable. Secondly, the so-called Brady amendment (backed by May’s administration) that asks the UK Prime Minister to replace the backstop solution with "alternative arrangements to avoid a hard border”, pushing the UK closer to a managed no-deal exit.

Theresa May will now travel to Brussels and ask for a unicorn

Initially, there was some indecisiveness in the markets over the Parliamentary vote. However, a unicorn Brexit negotiated outcome is now being reflected in the price of sterling as May heads to Brussels empty-handed, yet begging for a 'managed deal'. A managed deal would look something like something along the lines of paying the EU to allow a transition period before the no deal becomes a harsh reality. Markets seem to position for a probability-weighted much more benign Brexit outcome than just months (or even weeks) ago which is the foundations for what is arguably a very fragile support structure.

GBP/USD levels

"We have seen a retracement towards 1.3065/00 as expected (intraday Elliott wave count) and the near term uptrend at 1.2978. While underpinned by the near term uptrend, it stays bid and we look for gains to the 55 week ma at 1.3297," analysts at Commerzbank explained, adding, "Here we also find the July, September and October highs at 1.3258/1.3363. While we would allow for this to hold the initial test, there is scope for the June high at 1.3473 and the 200 week ma at 1.3650 slightly longer term."

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