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GBP/USD: Door open to a probable test of 1.2800 – UOB

Economist Lee Sue Ann and UOB Group Market Strategist Quek Ser Leang suggest that if GBP/USD continues to rise, it could revisit the 1.2800 zone In the next weeks.

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24 hour view: Yesterday, when GBP/USD was trading at 1.2635, we noted that “as long as GBP/USD doesn’t break below 1.2580, it could continue to rise.” However, we were of the opinion that “there does not seem to be enough momentum for GBP/USD to break the main resistance at 1.2685”. Although GBP/USD strengthened as we expected, the advance was considerably above our expectations. GBP/USD reached a high of 1.2746 before closing up 0.59% (1.2719 at New York close), its biggest one-day gain in more than a month. It is not ruled out that GBP/USD continues to rise, but it does not seem that there is enough momentum for it to reach 1.2800 today (there is a minor resistance at 1.2760). To the downside, if GBP/USD breaks below 1.2655 (minor support is at 1.2685), it would indicate no further progress.

Next 1-3 weeks: Yesterday (August 30, GBP/USD at 1.2635) we highlighted that “the likelihood of GBP/USD continuing lower has decreased” and added that “a break of 1.2685 would indicate that GBP/USD is likely to be range bound at instead of continuing lower” During the American session, GBP/USD not only broke above 1.2685, but also rallied and closed up 0.59% strongly (NY close at 1.2719). The rapidly increasing momentum suggests that rather than trading in a range, there is a chance for GBP/USD to rally as high as 1.2800, with a smaller chance of reaching 1.2845. To maintain its current momentum, GBP/USD must not fall below 1.2630 (“strong support” level).

Source: Fx Street

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