GBP/USD: Any decline is likely to remain within a lower range of 1.2600/1.2670 – UOB Group

Sharp drop could extend; any decline is likely to remain within a lower range of 1.2600/1.2670. In the longer run, momentum is slowing; a breach of 1.2580 would indicate that 1.2730 is out of reach this time around, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.

Momentum is slowing

24-HOUR VIEW: "We expected GBP to trade in a range between 1.2625 and 1.2680 yesterday. The subsequent price turned out differently than we expected. GBP rose sharply to 1.2690, plummeted to 1.2613, and then closed little changed (1.2626, -0.08%). While the sharp drop could extend, any decline is likely to remain within a lower range of 1.2600/1.2670. To look at it another way, a sustained break below 1.2600 is unlikely."

1-3 WEEKS VIEW: "We have held a positive GBP view since the middle of the month. Following GBP sharp rise last. Thursday, we indicated on Friday that 'the boost in momentum indicates further GBP strength to 1.2730.' Yesterday, GBP rose and eked out a fresh two-month high of 1.2690. It fell sharply from the high, closing largely unchanged. Upward momentum is beginning to slow, and a breach of 1.2580 (no change in ‘strong support’ level) would indicate that 1.2730 is out of reach this time around."