GBP/USD drops to fresh session lows as DXY edges higher toward 94

After rising above the 1.34 handle earlier today, the GBP/USD pair lost its traction and lost nearly 100-pips from its daily high as today's headlines surrounding Brexit negotiations made it difficult for the GBP to show resilience against its rivals.  Having touched a fresh session low at 1.3330, the GBP/USD is now trading at 1.3342, losing 50 pips, or 0.38% on the day.

Trade deal proves a roadblock in Brexit talks

Although comments from Brexit Secretary David Davis suggested that the UK would avoid a hard-border outcome with Ireland whether or not they reached a trade deal with the EU helped the GBP gather strength, a report by The Telegraph and British PM Minister Theresa May's comments later in the day pushed investors away from the pound. Quoting May's letter to her fellow party members, The Telegraph reported that Britain would not pay the financial settlement of €39 billion if they failed to agree on a trade deal. In fact, delivering her remarks on Brexit negotiations in the House Of Commons, May said, "Brexit bill is on the table only as part of a future agreement."

Meanwhile, following a failed attempt to close the previous week above the 94 threshold, the US Dollar Index made a technical correction during the first half of the day and eased to 93.65 before starting to retrace its corrective slide. As of writing, the index was virtually unchanged on the day at 93.85.

Ahead of the critical Fed and the BoE meetings later this week, the pair's price action is likely to continue to be dominated by Brexit headlines.

Technical levels to consider

On the downside, the pair could encounter the first technical support at 1.3320 (Dec. 17 low) ahead of 1.3250 (50-DMA) and 1.3200 (psychological level). On the flip side, resistances could be seen at 1.3430 (daily high), 1.3520 (Dec. 8 high) and 1.3630 (Sep. 20 high).