In the view of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, extra upside is likely in GBP/USD while above the 1.2505 level.
24-hour view: We noted last Friday that “the price movements still appear to be consolidative”, and we expected GBP to trade in a range between 1.2375 and 1.2460. Our view was not wrong, as GBP dropped to 1.2375, rebounded to a high of 1.2465, and then closed at 1.2462 (+0.38%). Upward momentum has improved, albeit just a tad. Today, there is room for GBP to rise further, but any advance is likely to encounter solid resistance near last week’s high, near 1.2505. In order to maintain the buildup in momentum, GBP must stay above 1.2420 (minor support is at 1.2440).
Next 1-3 weeks: After GBP soared to a high of 1.2506 last Tuesday, we indicated GBP “is likely to continue to advance, but it has to break clearly above 1.2580 before a further sustained rise is likely.” GBP pulled back sharply from the high, and last Friday (17 Nov, spot at 1.2415), we highlighted that “while upward momentum has waned somewhat, only a breach of 1.2350 would indicate that GBP is not advancing further.” In NY trade on Friday, GBP rebounded and closed at 1.2462 (+0.38%). Despite the rebound, there has been no significant increase in momentum. From here, GBP has to break and stay above 1.2505 before an advance to 1.2580 can be expected. The likelihood of GBP breaking clearly above 1.2505 will remain intact as long as it stays above 1.2385 (‘strong support’ level previously at 1.2350).