Further GBP strength unlikely – UOB

In opinion of FX Strategists at UOB Group, further gains in Sterling appears out of favour in the near term.

Key Quotes

24-hour view: “GBP rose initially to hit a high of 1.3659 but the up-move was short-lived. The rapid drop from the high appears incomplete and further weakness seems likely. That said, 1.3440 is a major support and is unlikely to yield so easily (next support is at 1.3400). Resistance is at 1.3530 followed by 1.3570. A move back above 1.3600 is not expected, at least not for today”.

Next 1-3 weeks: “We highlighted in recent updates that “another push higher to take out the major weekly-trend-line resistance at 1.3655 is not ruled out just yet”. GBP hit a high of 1.3659 yesterday and the subsequent sharp decline from the high does not bode well for the current bullish view. While another attempt higher is not ruled out, the failure to take out such a strong resistance has clearly diminished the odds for further GBP strength in the coming days. That said, only a move below 1.3440 (stop-loss level unchanged) would indicate that the bullish phase that started about 2 weeks ago (08 Sep, spot at 1.3100) has ended. Looking further ahead, a breach of 1.3440 would suggest that GBP has moved into a consolidation phase”.