GBP/USD forecast to trade within 1.3735-1.3900 – UOB

In opinion of FX Strategists at UOB Group, Cable is now seen navigating within the 1.3735-1.3900 range in the next weeks.

Key Quotes

24-hour view: “Yesterday, we held the view that GBP ‘could edge higher but a clear break of 1.3930 is unlikely’. However, GBP only rose to 1.3905 before dropping sharply to a low of 1.3800 during NY hours. Despite the rapid drop, downward momentum has not improved by all that much. From here, GBP could edge lower to1.3775 but the major support at 1.3735 is not expected to come under threat. Resistance is at 1.3830 but only a breach of 1.3860 would indicate that the current mild downward pressure has eased.”

Next 1-3 weeks: “On Monday (12 Jul, spot at 1.3895), we indicated that ‘the risk has shifted to the upside and GBP could advance to 1.3960’. We highlighted that ‘the upside risk is deemed intact as long as GBP does not move below the ‘strong support’ level at 1.3800’. GBP fell sharply to 1.3800 during NY session yesterday (13 Jul) and while 1.3800 is intact, the rapid loss of momentum has invalidated our view. Shorter-term downward momentum has improved somewhat but it is too early to expect the start of a sustained decline in GBP. From here, GBP is more likely to trade between 1.3735 and 1.3900 for a period of time. Looking ahead, the downside appears to be more ‘vulnerable’ but GBP has to close below 1.3735 before a period of sustained weakness can be expected.”