GBP/USD: Focus is now on 1.2970 – UOB

Cable’s rally is predicted to have ended on a breakdown of the 1.2970 level, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “GBP surged to 1.3170 last Friday before giving up most of its gains as it closed little changed at 1.3084 (-0.09%). The sharp pull-back is viewed as part of an on-going correction phase. From here, barring a move above 1.3130 (minor resistance is at 1.3100), the pull-back in GBP could extend towards 1.3025. The next support at 1.2990 is unlikely to come into the picture.”

Next 1-3 weeks: “While we have expected GBP to strengthen since 21 Jul (spot at 1.2670); in our latest narrative from last Thursday (30 Jul, spot at 1.2980), we held the view that GBP ‘could continue to advance but any potential gain is likely to be relatively modest. Next resistance is at 1.3080’. However, GBP blast past 1.3080 and surged to a high of 1.3170 last Friday. The subsequent sharp and rapid pullback has dented the upward momentum considerably and this coupled with overbought conditions suggest the rally in GBP could be coming to an end soon. From here, unless GBP moves and stays above 1.3170 within these few days, a breach of 1.2970 (‘strong support’ level previously at 1.2850) would indicate that the current positive phase in GBP has run its course.”