GBP/USD: Scope to extend to 1.3700 - UOB Group

While overbought, the advance in Pound Sterling (GBP) has scope to extend to 1.3700. In the longer run, there is room for further GBP gains toward 1.3700; the odds of an extended rise to 1.3765 are currently lower, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Room for further GBP gains toward 1.3700

24-HOUR VIEW: " Two days ago, GBP rose to a high of 1.3621. Yesterday, when GBP was at 1.3605, we indicated the following: 'Further GBP strength appears likely, even though, based on the current momentum, any advance is unlikely to reach 1.3660 today. Note that there is another resistance level at 1.3630. On the downside, support levels are at 1.3585 and 1.3570.' The anticipated advance exceeded our expectations as GBP rose to a high of 1.3670. Although overbought, the advance has scope to extend to 1.3700, but this time around, based on the current momentum, a sustained rise above this level is unlikely. The next major resistance at 1.3765 is also unlikely to come into view. On the downside, support levels are at 1.3635 and 1.3615."

1-3 WEEKS VIEW: "Last Friday (12 Sep, spot at 1.3575), we highlighted that 'there has been a slight increase in upward momentum, but it is not sufficient to indicate a sustained rise just yet.' We added that GBP 'must break and hold above 1.3595 before a move toward 1.3635 can be expected.' After GBP rose and closed at 1.3599 on Monday (15 Sep), we highlighted yesterday (16 Sep, spot at 1.3605) that 'the price action suggests GBP could rise to 1.3635, potentially reaching 1.3660.' Our view was not wrong, as GBP rose to a high of 1.3671 in the NY session. The outlook for GBP remains positive, and while there is room for further gains toward 1.3700, the odds of an extended rise to 1.3765 are currently lower. Overall, only a breach of 1.3575 ('strong support' level was at 1.3545 yesterday) would indicate that GBP is not rising further."