GBP/USD: Diminishing bets for a test of 1.2550 – UOB
FX Strategists at UOB Group believe the upside in Cable is unlikely to extend to the mid-1.2500s for the time being.
24-hour view: “While we expected the ‘rally in GBP to extend last Friday’, we held the view ‘1.2400 is likely out of reach’. The subsequent advance in GBP exceeded our expectation by a wide margin as it rocketed to a high of 1.2484. From here, there is scope for GBP to stage another push higher but a break of the strong 1.2550 level appears unlikely (Friday’s high near 1.2485 is acting as a minor resistance). Support is at 1.2350 followed by 1.2300.”
Next 1-3 weeks: “The outsized surge of +2.84% (NY close of 1.2210) came as a surprise. The breach of our 1.2150 ‘strong resistance’ indicates that the sell-off earlier this month is ready to take a breather. To look at it another way, last Friday’s (20 Mar) 1.1413 low is deemed as a short-term bottom. The current recovery has scope to extend higher but at this stage, the prospect for a move beyond 1.2550 is not high. On the downside, 1.1880 (‘strong support’ level) is expected to be strong enough to hold, at least for one week or so.”