GBP/USD recovers from daily lows, remains below 1.27

Following the sharp fall following the U.K. election outcome, the GBP/USD pair recorded a moderate recovery on Friday but came back under a renewed selling pressure on Monday amid heightened concerns surrounding the political uncertainty.

Brexit Minister David Davis crossed the wires earlier today, saying that the U.K. wants to be outside the single market and the customs union and added that they do not adopt the views and policies of the Democratic Unionist Party, which announced that it will try to get a good Brexit deal for Northern Ireland in talks with the Conservative Party on Monday. Following Davis' remarks, the pair fell to its session low at 1.2650 and is now trading at 1.2675, losing 0.6% on the day.

• UK’s Davis: We do not adopt the views and policies of the DUP - ITV
• GBP: Short-term woes, long-term hopes - ING

Until Wednesday's FOMC meeting outcome, the pair's price action is likely to be driven by the political jitters in the U.K. In the meantime, the greenback remains resilient against its rivals on Monday as the US Dollar Index is flat at 97.22 at the moment.

Technical outlook

With a decisive break below the 100-DMA at 1.2630, the pair could aim for 1.2580 (Fib. 50% retracement of mid-March - mid-May rise) ahead of 1.2515 (Apr. 18 low). On the upside, 1.2690/1.2700 (Fib. 38.2% retracement/psychological level) is the initial resistance before 1.2770 (daily high) and 1.2825 (Fib. 23.6%). The RSI on the daily graph is approaching the oversold region, suggesting that a short-term technical correction could be witnessed ahead of the next leg down. 

• GBP/USD further downside expected – Commerzbank