Pound Sterling (GBP) may test the major resistance at 1.3620; it remains to be seen if it can break and hold above this level. In the longer run, outlook for GBP remains positive, and it may rise to 1.3620; the chances of it reaching 1.3660 this time around are more limited, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Outlook for GBP remains positive

24-HOUR VIEW: "On Tuesday, GBP rose to a high of 1.3523. Yesterday, Wednesday, when GBP was at 1.3505, we held the view that it 'could continue to rise, but any advance is unlikely to reach the major resistance at 1.3555.' We underestimated the upward momentum, as GBP soared above 1.3555, reaching a high of 1.3585. Strong momentum is likely to outweigh the overbought conditions, and GBP may test the major resistance at 1.3620 today. It remains to be seen if it can break and hold above this level. To sustain the momentum, GBP must hold above 1.3530 (with minor support at 1.3555)."

1-3 WEEKS VIEW: "We turned positive on GBP last Friday (08 Aug, spot at 1.3445). We indicated that 'the rapid increase in momentum could lead to GBP rising to 1.3515.' After GBP rose above 1.3515 two days ago, we stated early yesterday (13 Aug, spot at 1.3505) that 'despite the advance, there has been no clear increase in upward momentum.' However, we pointed out that 'there is scope for GBP to continue to rise to 1.3555.' We added, 'it is too early to expect the late July high, near 1.3590, to come into view.' While our directional call was correct, we underestimated the strength and persistence of the upward momentum, as GBP soared to a high of 1.3585. From here, the outlook for GBP remains positive, and it may rise to 1.3620, although the chances of it reaching 1.3660 this time around are more limited. Overall, only a breach of 1.3485 (‘strong support’ level was at 1.3420 yesterday) would indicate that GBP is not rising further."