GBP/USD struggles to rise above 1.32, starts to retrace gains on USD strength

Fueled by the optimistic remarks coming from the EU leaders and British PM Theresa May following their Article 50 discussion at the EU summit today, the GBP/USD pair advanced to the 1.32 handle before losing its momentum in the NA session. At the moment, the pair is trading at 1.3178, up 0.15% on the day.

Earlier today, May said that the UK was ready to honor the financial commitments made to the EU and added that the EU didn't need to be concerned over their budget plan. Speaking at a joint press conference with European Commission President Jean-Claude Juncker, European Council President Donald Tusk said that they succeeded at today's summit to rebuild an atmosphere of trust with the UK on Brexit. In the meantime, Juncker stated that he hated the "no-deal" scenario.

However, the pair struggled to extend its gains during the second half of the day as the greenback started to gather strength against its peers. Today's better-than-expected existing home sales data and a sharp upsurge witnessed in the US Treasury-bond yields lifted the US Dollar Index to its highest level in two weeks at 83.67. At the moment, the index is at 93.65, adding 0.7% on the day, while the 10-year T-bond yield is up 3%. The US Senate's 2018 fiscal year budget approval, which paves the way for Trump administration to go on with their proposed tax reform without Democrats' approval, seems to be the main catalysts behind the T-bod yields' rally.

• US: After 3 straight monthly declines, existing-home sales slightly reversed course in Sept

Cleveland Fed President Loretta Mester will be delivering a speech later in the session but it's unlikely that she would reverse the positive mood surrounding the DXY.

Technical outlook

The initial hurdle for the pair aligns at 1.3200 (psychological level/daily high) ahead of 1.3285 (Oct. 17 high) and 1.3340 (Oct. 13 high). On the downside, supports could be encountered at 1.3100 (100-DMA), 1.3030 (Oct. 6 low) and 1.3000 (psychological level).

Headlines from the EU summit:

• UK PM May: Ambitious and positive about Brexit negotiations
• UK PM May: Full and final financial settlement will come as final Brexit agreement
• EU’s Tusk: Succeeded at summit to rebuild atmosphere of trust with UK on Brexit
• EU’s Juncker: Hate the no-deal scenario on Brexit