GBP/USD: May break above the 1.2720 level – UOB Group

Bias for the Pound Sterling (GBP) is tilted to the downside; any decline is unlikely to break below 1.2645. Rejuvenated momentum indicates that the risk remains on the downside; the levels to watch are 1.2645 and 1.2610, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Next resistance is at 1.2720

24-HOUR VIEW: “Two days ago, GBP fell sharply. Yesterday, we indicated that ‘while the decline is oversold, it has not stabilised,’ and we held the view that GBP could drop to 1.2645 before stabilisation can be expected. We added, ‘resistance is at 1.2710; a breach of 1.2735 would suggest that the weakness in GBP has stabilised.’ Our view did not materialise, as GBP traded between 1.2682 and 1.2734, closing largely unchanged at 1.2689 (-0.03%). While there has been no clear increase in downward momentum, the bias for GBP still seems to be tilted to the downside. Today, as long as 1.2720 (minor resistance is at 1.2700) is not breached, GBP is likely to drift lower. However, any decline is unlikely to break 1.2645.”

1-3 WEEKS VIEW: “We have held a negative GBP view for about two weeks now. After GBP fell sharply two days ago, we indicated yesterday that ‘the rejuvenated momentum indicates that the risk remains on the downside.’ We pointed out ‘the levels to watch are 1.2645 and 1.2610.’ We added, ‘the latter level is solid support (near June’s low).’ We will continue to hold the same view as long as 1.2765 (‘strong resistance’ level was at 1.2780 yesterday) is not breached.”