GBP/USD drops as US yields rise, May's words are fully digested

• The GBP/USD is trading around $1.3830, dropping from the highs of $1.3877.
• The optimistic words of UK PM May about reaching a deal sent the pound higher, but her message was more nuanced. 
• The pair continues trading at the familiar ranges that were seen in recent weeks.

The GBP/USD has pared a significant part of its earlier gains. The US Dollar has gained some ground as fears about a trade war have eased. US stocks are trading higher and US 10-Year Treasury yields are also up to around 2.89%, supporting the greenback.

Earlier, the pound gained ground after UK Prime Minister Theresa May said a deal on the Brexit transition is close. The optimistic words sent the British Pound higher across the board. However, the PM also said that the UK government is preparing for all the possible scenarios and that the UK will leave the EU in March 2019, according to Article 50.

These additional comments suggest that leaving without a deal is also an eventuality that is on the cards. May also said that there will be no second referendum on Brexit and that she would not like to see a hard border between Ireland and Northern Ireland. 

Earlier in the day, both UK and US Services PMI figures came out above expectations, indicating faster growth in the all-important sector. However, the main theme in the market remains the future of trade. 

GBP/USD Technical Analysis

Immediate resistance awaits at $1.3877, the high level of the day. A break would open the door to $1.3915, which was the late-February high. Further above, the round number of $1.4000 is of important psychological importance.

Looking down, $1.3766 was the daily low, which is closely tracked by $1.3755, the low on Friday. Further significant support awaits at $1.3620, a high that was seen in late 2017.

The pair is trading higher on the day but at levels seen in recent weeks, looking for a new direction.