Pound Sterling (GBP) could test the major resistance at 1.2730 vs US Dollar (USD); a break of this level is not ruled out, but 1.2770 is unlikely to come into view. In the longer run, risk for GBP is on the upside; to rise in a sustained manner, GBP must break and remain above 1.2730, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Risk for GBP is on the upside
24-HOUR VIEW: “We did not expect GBP to soar yesterday (we were expecting range trading). The sharp and rapid rally appears to be running ahead of itself. However, provided that 1.2645 (minor support is at 1.2670) is not breached, GBP could test the major resistance at 1.2730. A break of this level is not ruled out, but given the overbought conditions, the next major resistance at 1.2770 is unlikely to come into view.”
1-3 WEEKS VIEW: “Last Friday (28 Feb, spot at 1.2600), we revised our GBP view from positive to neutral, indicating that ‘the current price movements are likely part of a range trading phase, and for the time being, we expect GBP to trade between 1.2520 and 1.2670.’ Yesterday, GBP took off and surged, reaching a high of 1.2724. The increase in momentum indicates further upside risk, but to rise in a sustained manner, GBP must break and remain above 1.2730. The probability of GBP breaking clearly above 1.2730 will increase in the next few days as long as the ‘strong support’ level, currently at 1.2610, is not breached. In the near term, there is another support level at 1.2645.”
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