GBP/USD sideways near mid-1.29's amid lack of catalysts

The GBP/USD pair started the week with a small bullish gap but struggled to extend its gains amid a relatively low trading volume due to the Labor Day holiday in the U.S. on Monday. As of writing, the pair was trading at 1.2947, losing 0.03% on the day.

Although the US Dollar Index remains in the negative territory on Monday, the uncertainty surrounding the Brexit negotiations continue to weigh on the cable. Moreover, the risk-aversion that seems to be dominating the price action makes it even more difficult for the GBP to find demand. At the moment, the DXY was at 92.52, down 0.32% on the day.

Over the weekend, Michel Barnier, the EU's chief Brexit negotiator, said that the U.K. needed to be educated over the consequences of Brexit and added that it was his job to teach them what leaving the EU meant. On the other hand, UK Chancellor Philip Hammond in a speech on Monday argued that that it wasn't time for lawmakers to seek to amend or delay the EU withdrawal legislation. In a recent report, Viraj Patel, Foreign Exchange Strategist at ING, argued "the smooth passage of the EU Repeal Bill may not actively drive GBP higher, though it will certainly offer some good news amid a backdrop of Brexit-related negative sentiment."

On Tuesday, the economic calendar will feature the Markit Services PMI data from the U.K., which is expected to ease to 53.5 in August from 53.8 in July. Later in the day, FOMC members Brainard, Kashkari and Kaplan's speeched will be in the limelight as investors will look to have a clear view about the balance sheet reduction and the next rate hike.

Technical outlook

With today's price action, the pair is suggesting a near-term neutral outlook with the RSI on the daily graph moving sideways near the 50 handle. The pair could encounter the first technical support at 1.2920 (100-DMA) followed by 1.2850 (Aug. 31 low) and 1.2800 (psychological level). On the upside, resistances could be seen at 1.2980 (50-DMA), 1.3020 (Aug. 14 high) and 1.3100 (psychological level). 

• GBP/USD upside seen struggling around 1.3160 – Commerzbank