In light of the recent price action, GBP/USD could reach the 1.3960 level in the next weeks, suggested FX Strategists at UOB Group.
Key Quotes
24-hour view: “Our expectation for GBP to ‘trade sideways’ was incorrect as it soared to 1.3909 before closing of a strong note. While overbought, strong upward momentum suggests that there is room for the advance in GBP to test 1.3930. For today, the next resistance at 1.3960 is unlikely to come into the picture. On the downside, a breach of 1.3835 (minor support is at 1.3865) would indicate that the current upward pressure has eased.”
Next 1-3 weeks: “We highlighted last Wednesday (07 Jul, spot at 1.3800) that ‘downward momentum is beginning to build but GBP has to close below 1.3735 before a sustained decline can be expected’. As GBP struggled to move lower, we highlighted on Friday (09 Jul, spot at 1.3790) that ‘while there is still chance for GBP to close below 1.3735, the odds for such a move have diminished’. That said, we did not expect the subsequent strong surge in GBP that sent it a high of 1.3909. The rapid rise has shifted the risk to the upside and GBP could advance to 1.3960. At this stage, prospect for a sustained rise above this level is not high. The upside risk is deemed intact as long as GBP does not move below the ‘strong support’ level at 1.3800.”
