In the opinion of UOB Group’s Market Strategist Quek Ser Leang and Senior FX Strategist Peter Chia, GBP/USD is now seen within the 1.2000-1.2280 range in the next weeks.
24-hour view: “Yesterday, we expected GBP to ‘trade within a range of 1.2130/1.2290’. Our expectation for range trading was not wrong even though GBP traded within a narrower range than expected (1.2129/1.2266). GBP closed on a soft note at 1.2135 (-0.41%) and downward momentum is beginning to build, albeit tentatively. As long as GBP does not move above 1.2200 (minor resistance is at 1.2160), it is likely to trade with a downward bias today. That said, any decline is expected to encounter solid support at 1.2060.”
Next 1-3 weeks: “We highlighted yesterday (06 Dec, spot at 1.2190) that ‘upward momentum is beginning to wane and the likelihood of GBP advancing to 1.2400 has diminished considerably’. GBP subsequently rose to 1.2266 before dropping to a low of 1.2129 in late NY trade. While our ‘strong support’ at 1.2130 was marginally breached, upward momentum has dissipated. In other words, the GBP strength that started late last week (see annotations in the chart below) has come to an end. From here, the underlying tone has softened a tad and while GBP is likely to edge lower, any decline is viewed as part of a 1.2000/1.2280 consolidation range. To look at it another way, a sustained decline below 1.2000 is unlikely.”
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