GBP/USD neutral now, moved to a correction phase – UOB

According to FX Strategists at UOB Group, Cable’s outlook has now shifted to neutral, facing some consolidation in the near term.

Key Quotes

24-hour view: “Instead of trading sideways (as expected last Friday), GBP rose strongly and hit a high of 1.3360 before settling on a firm note. While the up-move appears to be running ahead of itself, there is room for extension to 1.3390. The next resistance is at 1.3425 and this level is unlikely to come into the picture for now. Support is at 1.3320 but only a move back below 1.3285 would indicate that the current upward pressure has eased”.

Next 1-3 weeks: “While we highlighted the severely oversold conditions in recent updates, the relatively strong gain of +0.41% last Friday was not exactly expected (the +0.41% up-move is the largest 1-day gain since mid-April). Interestingly, GBP hit a high of 1.3360 last Friday, exactly at the ‘stop-loss’ level for our bearish view. That said, the subsequent strong daily closing is enough to indicate that the bearish phase that started in early May has ended. The current movement is viewed as part of a neutral correction phase even though the positive shorterterm momentum outlook could lead to a move higher towards 1.3465. At this stage, a clear break above this level is not expected. On the downside, only a move back below the ‘key support’ at 1.3250 would indicate the immediate upward pressure has eased”.