GBP/USD stays under pressure below 1.34 despite greenback weakness

The GBP/USD, which was able to advance above the 1.34 mark in the early trading hours of the European session, lost its momentum and turned negative on the day as Brexit headlines continue to underpin the demand for the GBP. As of writing, the pair was trading at 1.2270, down 0.17% on the day.

Brexit talks keep investors away from GBP

Earlier today, the UK's Brexit Secretary David Davis argued that they could avoid a hard border outcome with Ireland regardless of the result of the Brexit trade talks, allowing the GBP to gather some strength against its peers. However, the positive impact of that comment faded away after a recent article published in The Telegraph claimed that Britain wouldn't pay the financial settlement bill if they failed to reach a trade deal with the EU. In a letter to her party members, "it depends upon a broader agreement being reached – as I have said, nothing is agreed until everything is agreed – so if there is no agreement then our offer also falls away," British Prime Minister Theresa May wrote according to the newspaper's report.

In the meantime, before the Fed publishes its monetary policy decisions and the updated economic projections on Wednesday, the US Dollar Index is consolidating last week's upsurge below the 94 mark. At the moment, the index is at virtually unchanged on the day at 93.82.

Amid a lack of macroeconomic data releases in the remainder of the day, the pair is likely to react to fresh developments around Brexit negotiations.

Technical outlook

Despite the pair's failure to stay above the 1.34 mark, the RSI indicator on the daily graph moves sideways near the 50 handle, suggesting a near-term neutral outlook for the pair. On the downside, the first technical support could be seen at 1.3320 (Dec. 17 low), 1.3250 (50-DMA) and 1.3200 (psychological level). On the upside, resistances align at 1.3430 (daily high), 1.3520 (Dec. 8 high) and 1.3630 (Sep. 20 high).