GBP/USD now faces some near-term consolidation – UOB

GBP/USD is now seen trading within 1.2650-1.2850 for the time being, suggest Markets Strategist Quek Ser Leang and Senior Economist Alvin Liew at UOB Group.

Key Quotes

24-hour view: After GBP dropped to 1.2714 and rebounded, we highlighted yesterday that “the rebound has room to extend but any advance is expected to face solid resistance at 1.2805.” We did not expect the elevated volatility as GBP rose briefly to 1.2803, plunged to 1.2691 and then rebounded to end the day little changed at 1.2768 (+0.04%). The slight increase in momentum after the rebound, suggests GBP is likely to edge higher but 1.2805 remains as a solid resistance level. The next major resistance at 1.2850 is unlikely to come under threat. Support is at 1.2735, followed by 1.2700. 

Next 1-3 weeks: We highlighted yesterday that “as long as 1.2700 is not breached, there is a chance, albeit a slim one for GBP to rise further to 1.2900”. In London trade, GBP dropped below 1.2700 (low of 1.2691) and then rebounded. The breach of 1.2700 indicates the GBP strength that started more than a week ago has ended. GBP is likely to trade between 1.2650 and 1.2850 for now. Looking ahead, if GBP breaks and stays above 1.2850, it will indicate GBP’s strength has resumed.