A test of 1.2510 emerges on the horizon – UOB

The continuation of the upside bias could prompt GBP/USD to revisit the 1.2500 zone in the next few weeks, according to UOB Group’s Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia.

Key Quotes

24-hour view: The sudden surge that sent GBP rocketing to a high of 1.2389 came as a surprise (we were expecting it to trade in a range). While severely overbought, GBP could rise above 1.2400 first before levelling off. The next resistance at 1.2430 is likely out of reach for now. Support is at 1.2330, followed by 1.2300. 

Next 1-3 weeks: We highlighted last Friday that we maintained our view that GBP “is likely to trade in a range between 1.2085 and 1.2240.” We also highlighted that “looking ahead, the chance of GBP breaking above the top of the expected range first is higher than it breaking below the bottom of the range.” That said, we did not anticipate GBP to lift off and surge by 1.46% (NY close of 1.2380). From a short-term perspective, the outsized rally appears to be overstretched. However, as long as GBP stays above 1.2245 (‘strong support’ level), it could rise above 1.2430, possibly reaching the major resistance of 1.2510.