Constructive outlook in place above 1.3000 – UOB

Further gains are likely in GBP/USD while above the 1.3000 level, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We highlighted yesterday that “as long as 1.2930 is not breached, GBP could grind higher to 1.3035.” We held the view that “1.3100 is highly unlikely to come into view.” Instead of ‘grinding higher’, GBP jumped to a high of 1.3144 before closing higher by 1.11% (NY close of 1.3134), its biggest 1-day gain in four months. Conditions are severely overstretched, but today, as long as 1.3055 (minor support is at 1.3080) is not breached, GBP could rise to 1.3160. We do not expect the next major resistance at 1.3330 to come into view today. 

Next 1-3 weeks: We have expected GBP to strengthen since Monday (10 Jul), when it was trading at 1.2830 (see annotations in the chart below). After GBP rose above 1.3000, we indicated yesterday (13 Jul, spot at 1.2990) that “the focus is at 1.3100 now.” However, we were of the view that “it might take a few days before this level comes into view.” We did not anticipate GBP to jump by 1.11%, as it surged to a high of 1.3144 in late NY trade. From here, the next significant resistance is at 1.3335. We will continue to hold a positive GBP view as long as it stays above 1.3000 (‘strong support’ level was at 1.2885 yesterday).