GBP/USD: Likely to trade between 1.3585 and 1.3705 – UOB Group

Pound Sterling (GBP) is likely to trade in a range, probably between 1.3585 and 1.3705. In the longer run, week-long positive outlook has been negated; for a continued down-move, GBP must first close below 1.3560, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Week-long positive outlook has been negated

24-HOUR VIEW: "GBP rose to a multi-year high of 1.3787 two days ago and then pulled back to close largely unchanged at 1.3742 (+0.09%). Yesterday, we noted that 'momentum indicators are turning flat.' We expected GBP to 'consolidate in a range between 1.3700 and 1.3780.' Instead of consolidating, GBP plummeted to a low of 1.3563 before rebounding to close at 1.3635 (-0.78%). The sharp decline appears excessive. This, combined with the rebound from oversold conditions suggests that GBP is likely to trade in a range today, probably between 1.3585 and 1.3705."

1-3 WEEKS VIEW: "After holding a positive outlook on GBP for about a week, we highlighted yesterday (02 Jul, spot at 1.3745) that 'there are early signs that upward momentum is beginning to slow.' We also highlighted that GBP 'must break and hold above 1.3800 soon, or the probability of further GBP strength will diminish rapidly.' While our early signals were timely, we did not expect the sharp selloff in GBP that reached a low of 1.3563. The breach of our ‘strong support’ at 1.3670 has negated the positive outlook. Short-term downward momentum is increasing, but it is not strong enough to indicate a sustained decline just yet. For a continued down-move, GBP must first close below 1.3560. The likelihood of GBP closing below 1.3560 will remain in place as long as the ‘strong resistance’ level, now at 1.3750, is not breached."