- GBP/USD has been moving sideways between key technical levels.
- Additional losses are likely if the pair fails to hold above 1.3740.
- Brexit headlines could trigger a sharp move and force the pair out of its range.
The GBP/USD pair has lost its strength in the early European session on Wednesday and the technical outlook suggests that the bearish pressure is likely to gain momentum in the near term.
On Tuesday, the upbeat CBI Retail Retail Sales report provided a boost to GBP/USD. However, the broad-based dollar strength forced the pair to reverse its direction in the second half of the day. Meanwhile, Brexit-related headlines offer little to no help to the GBP.
Thierry Breton, Internal Market Commissioner for the European Union, argued that Brexit has resulted in an "economic catastrophe" for the UK. Breton further said that they had seen "a lot of bad faith" from Britain.
On a positive note, David Frost, the British minister responsible for implementing the Brexit deal, said that the UK probably won't be imposing a strict level of checks on EU imports. "I would be surprised if, when we finally bring in these controls in January and July, we do exactly the same thing as the EU does," Frost explained.
Later in the day, the Durable Goods Orders from the US will be looked upon for fresh impetus. Currently, the US Dollar Index is holding below 94.00 and a break above that level could trigger additional USD-buying and weigh on GBP/USD.
GBP/USD technical analysis
As of writing, GBP/USD is testing the lower limit of its trading range at 1.3740. In case this level turns into resistance, additional losses toward 1.3700 (psychological level, 100-period SMA on the four-hour chart) and 1.3680 (Fibonacci 23.6% retracement, 200-period SMA) could be witnessed.
In the meantime, the Relative Strength Index (RSI) indicator on the four-hour chart fell below 50, suggesting that the bearish momentum is building up. Moreover, the pair failed to return into the ascending regression channel coming from late September.
On the upside, 1.3760 (20-period SMA, 50 period SMA) aligns as the first hurdle before 1.3800 (psychological level, ascending channel resistance) and 1.3830/40 (October 20 high, October 21 high, middle line of the channel).
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