The Pound Sterling (GBP) could rise to 1.2625; the strong resistance at 1.2650 is unlikely to come into view. In the longer run, sharp drop appears to be overextended; any further decline may find it difficult to break below 1.2475, UOB Group’s FX analyst Quek Ser Leang and Lee Sue Ann notes.
Strong resistance at 1.2650 is unlikely to come into view
24-HOUR VIEW: “After GBP plummeted to a low of 1.2577 last Thursday, we indicated on Friday, when GBP was at 1.2590, that ‘Given the rapid increase in momentum, a break of 1.2565 will not be surprising.’ However, we pointed out, ‘the deeply oversold conditions indicate that the next significant support at 1.2490 is not expected to come into view for now.’ GBP fell more than expected to 1.2475 before rebounding quickly, closing at 1.2535. It opened and traded higher in early Asian trade today. While upward momentum has not increased much, there is scope for it to rise to 1.2625 before levelling off. The strong resistance at 1.2650 is unlikely to come into view. On the downside, should GBP break below 1.2530 (minor support is at 1.2560), it would mean that it is not rising further.”
1-3 WEEKS VIEW: “We turned negative in GBP about two weeks ago (12 Nov), when it was at 1.2875. As we tracked the decline, we highlighted last Friday that GBP ‘is likely to break below 1.2565, and the next level to monitor is 1.2490.’ GBP subsequently plunged and exceeded both technical objectives, reaching a low of 1.2475. Although there is still room for GBP to continue to weaken, the sharp drop over the past couple of weeks appears to be overextended. To look at it another way, any further decline may find it difficult to break the 1.2475 low, which is serving as a significant support level now. That said, only a breach of 1.2650 (‘strong resistance’ level previously at 1.2665) would indicate that the weakness in GBP has stabilised.”
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