Current price movements are likely part of a sideways trading phase between 1.3515 and 1.3605. In the longer run, GBP must first close above 1.3640 before a move to 1.3700 can be expected, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Likelihood of closing above 1.3640 remains intact while above 1.3515
24-HOUR VIEW: “GBP rose sharply and closed higher by 0.58% at 1.3615 last Thursday. On Friday, when GBP was at 1.3600, we pointed out that ‘conditions are deeply overbought, and GBP is unlikely to rise much further.’ We expected GBP to ‘trade in a higher range of 1.3540/1.3640.’ However, GBP pulled back to 1.3518 before rebounding to close at 1.3574 (-0.30%). Momentum indicators are turning flat, and the current price movements are likely part of a sideways trading phase, probably between 1.3515 and 1.3605.”
1-3 WEEKS VIEW: “We revised our GBP view to neutral last Thursday (12 Jun, spot at 1.3565), stating that GBP ‘appears to have moved into a 1.3495/1.3620 range trading phase.’ After GBP rose and closed at 1.3616, we highlighted the following last Friday (13 Jun, spot at 1.3600): ‘Upward momentum is increasing, but we prefer to wait for a decisive close above 1.3640 before revising our GBP outlook to positive. The likelihood of GBP closing above 1.3640 will remain intact as long as 1.3515 is not breached.’ GBP subsequently pulled back close to our ‘strong support’ level of 1.3515, reaching a low of 1.3518. We will maintain our view for now, but after the pullback, the likelihood of GBP closing above 1.3640 has diminished considerably.”
