GBP/USD: Any advance could be limited to a test of 1.3535 - UOB Group

Pound Sterling (GBP) could strengthen further against US Dollar (USD); overbought conditions suggest that any advance could be limited to a test of 1.3535. In the longer run, the outlook for GBP has shifted from negative to neutral; GBP is likely to trade in a range between 1.3415 and 1.3535, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Outlook for GBP has shifted from negative to neutral

24-HOUR VIEW: "We expected GBP to edge lower yesterday. However, instead of edging lower, GBP soared to a high of 1.3510, closing higher by 0.61% at 1.3492. While strong momentum may lead to further GBP strength, overbought conditions suggest that any advance could be limited to a test of 1.3535. A clear break above this level is unlikely. To sustain the overbought momentum, GBP must hold above 1.3450, with minor support at 1.3470."

1-3 WEEKS VIEW: "We have held a negative GBP view since early this month. Tracking the subsequent price movements, in our latest narrative from last Wednesday (16 Jul, spot at 1.3395), we stated that 'GBP view is still negative.' However, we also indicated that 'the next technical target at 1.3320 may not come into view so soon, as it could consolidate first.' After consolidating for a few days, GBP soared yesterday and broke above our 'strong resistance' level at 1.3490. The breach of the 'strong resistance' indicates that the outlook for GBP has shifted from negative to neutral. From here, GBP is likely to trade in a range between 1.3415 and 1.3535. Given the buildup in short-term momentum, the risk of GBP breaking above 1.3535 is higher, potentially paving the way for a more sustained advance."