GBP/USD: Likely to test 1.3610 before leveling off - UOB Group

Pound Sterling (GBP) could test 1.3610 before leveling off; the next resistance at 1.3650 is unlikely to be threatened. In the longer run, outlook for GBP remains positive, but the next resistance at 1.3650 is unlikely to come into view so soon, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Outlook for GBP remains positive

24-HOUR VIEW: "Subsequent to the strong advance in GBP early this week, we highlighted yesterday that 'the sharp rise over the past couple of days appears to be overdone, and instead of continuing to advance, GBP is more likely to consolidate today, probably between 1.3475 and 1.3535.' Our view of consolidation was incorrect, as GBP continued to rise, reaching a high of 1.3585. The advance still appears to be overextended, but upward momentum is not showing signs of easing just yet. Today, GBP could test 1.3610 before leveling off. The next resistance at 1.3650 is unlikely to be threatened. To sustain the overbought momentum, GBP must hold above 1.3530, with minor support at 1.3555."

1-3 WEEKS VIEW: "Two days ago (22 Jul, spot at 1.3485), we indicated that GBP 'is likely to trade in a range between 1.3415 and 1.3535.' After GBP rose to a high of 1.3434, we pointed out yesterday (23 Jul, spot at 1.3520) that 'a clear break above 1.3535 would indicate that GBP could rise to 1.3575.' We did not expect the rapid build-up in momentum, as GBP not only rose above 1.3535, but also 1.3575 (high has been 1.3585). Although the outlook for GBP remains positive, short-term conditions are deeply overbought, and the next resistance at 1.3650 is unlikely to come into view so soon. Note that there is another resistance level at 1.3610. Overall, only a breach of 1.3490 ('strong support' level was at 1.3455 yesterday) would indicate that the current upward pressure has eased."