Sterling is likely to remain capped as the late October deadline for a trade agreement approaches with little sign of a compromise.
The UK's decision last week to rewrite the Withdrawal Agreement with the Internal Markets Bill has further polarized negotiations with the European Union nL8N2G75Q1.
The bill will be fiercely debated in the lower house of parliament on Monday and could be approved, but is likely to struggle in the upper house later this week nL8N2G84NV.
If the bill is passed in its current form, Ireland believes Brexit negotiations will break down nL8N2GA0CN.
A hard Brexit would certainly have a major economic impact, especially on the UK, as the auto industry illustrates, nL4N2G907D.
Yet the EU and UK's lead Brexit negotiators continue to squabble, this time about food imports nL9N2ER03W.
It is hard to see a compromise based on recent Brexit rhetoric, as the degree of trust between both sides appears at a very low ebb, and positions are entrenched.
Technically, sterling's setup looks bearish with 5, 10 and 21 daily moving averages falling, while 21-day Bollinger bands expand.
The 1.2786 lower Bollinger band suggests GBP/USD remains oversold short term, with major support in view at 1.2721-1.2735, 61.8% of the June-September rise and the 200 DMA.
Expect 1.2720 to be resilient for now, but vulnerable as oversold signals unwind later this week.
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