GBP/USD: Scope for extra gains – UOB

Cable could edge higher and surpass 1.3900 in the short term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that GBP ‘could test 1.3860 first before easing’. We added, ‘the major resistance at 1.3900 is unlikely to be challenged’. While our view for a stronger GBP was not wrong, we did not quite expect the sharp rise to 1.3894. The strong advance could extend above 1.3915 but in view of the overbought conditions, GBP may not be able to maintain a foothold above this level. The next resistance at 1.3955 is unlikely to come into the picture. Support is at 1.3850 followed by 1.3820.”

Next 1-3 weeks: “We noted yesterday (27 Jul, spot at 1.3825) that upward momentum has improved and we expected GBP to ‘trade with an upward bias towards 1.3900’. However, we did not quite expect the subsequent rapid advance in GBP to 1.3894. Upward momentum is strong and there is room for GBP to advance further. That said, overbought shorter-term conditions suggests that 1.3955 may not come into the picture so soon. All in, the positive outlook is deemed intact as long as GBP does not move below 1.3770 (‘strong support’ level was at 1.3740 yesterday).”