Pound Sterling (GBP) is likely to trade in a sideways range of 1.3540/1.3640 against US Dollar (USD). In the longer run, the likelihood of GBP dropping to 1.3510 is increasing, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Likelihood of GBP dropping to 1.3510 is increasing
24-HOUR VIEW: “GBP dropped to a low of 1.3576 two days ago and then closed at 1.3602. When GBP was at 1.3625 in the early Asian session yesterday, we stated that ‘despite the decline, downward momentum has not increased significantly, and instead of continuing to weaken, GBP is more likely to consolidate in a range of 1.3580/1.3660.’ The subsequent price movements did not turn out as we expected. GBP rose to 1.3647, plummeted to 1.3528 before snapping back up to close largely unchanged at 1.3592 (-0.06%). The brief drop did not lead to any increase in downward momentum. GBP is likely to trade sideways today, probably in a range of 1.3540/1.3640.”
1-3 WEEKS VIEW: “Last Thursday (03 Jul, spot at 1.3650), we indicated that ‘short-term downward momentum is increasing, but it is not strong enough to indicate a sustained decline just yet.’ We also highlighted that ‘for a continued down-move, GBP must first close below 1.3560.’ After GBP dropped to a low of 1.3576 on Monday, we indicated yesterday (08 Jul, spot at 1.3625) that ‘while downward momentum has increased further, we prefer to wait for GBP to close below 1.3560 before expecting a move to 1.3510.’ GBP subsequently dropped to a low of 1.3528 before recovering to close at 1.3593. Downward momentum continues to build, albeit not by much. That said, the likelihood of GBP dropping to 1.3510 is increasing. Overall, only a breach of 1.3680 (‘strong resistance’ level was at 1.3700 yesterday) would indicate that the current downward bias has faded.”
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