UOB’s Quek Ser Leang and Lee Sue Ann note that GBP/USD gapped lower after briefly breaking above 1.3445, with momentum turning down and risks of a test below 1.3360, though 1.3320 is seen as distant for now. They judge that the advance from late last month has ended and expects a 1.3320–1.3445 range in coming weeks, with broader 1.3210–1.3655 levels on a 1–3 month view.

Pound advance seen losing steam

"24-HOUR VIEW: Last Friday, when GBP was at 1.3410, we indicated that “there is a chance for GBP to test the major resistance at 1.3445.” However, we were of the view that “a clear break above this level is unlikely.” We added, “support is at 1.3390.” While GBP rose more than expected to 1.3452, it then staged a sharp retreat to 1.3392 before closing largely unchanged at 1.3402 (-0.05%). Today, GBP gapped lower on the open. The rapid increase in momentum suggests GBP could break below 1.3360. The next support at 1.3320 is likely out of reach. Resistance is at 1.3390; a breach of 1.3410 would mean the immediate downward pressure has faded."

"1-3 WEEKS VIEW: We have held a positive GBP view since late last month (see annotations in the chart below). Last Thursday (09 Jul, spot at 1.3390), we highlighted that “while the risk remains on the upside, given that there has been no further increase in upward momentum, it is left to be seen if GBP can reach 1.3445.” After GBP rose to 1.3430, we highlighted on Friday (10 Jul, spot at 1.3410) that “upward momentum has strengthened somewhat, and should GBP break above 1.3445, the next level to watch is 1.3480.” The subsequent price movements did not quite turn out as expected. GBP broke above 1.3445 and printed a high of 1.3452 before dropping sharply. It continued to decline today. Although our ‘strong support’ level at 1.3360 has not been breached yet, upward momentum has largely faded. To put it another way, the GBP advance from late last month has ended, and for the time being, we expect GBP to trade in a range between 1.3320 and 1.3445."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)