FX Strategists at UOB Group note that although the bid tone in GBP/USD is expected to persist in the near-term, a test of the 1.3010-region appears unlikely for the time being.
- "24-hour view: While we expected GBP to strengthen yesterday, we held the view “1.2975 is unlikely to come in to the picture”. The subsequent GBP strength exceeded our expectation as GBP popped briefly to a high 1.2985. The combination of lackluster momentum and overbought conditions suggest 1.2985 could be a short-term top. That said, a sustained pullback is not expected. GBP is more likely to consolidate and trade sideways at these higher levels, expected to be within a 1.2915/1.2975 range.
- Next 1-3 weeks: We indicated yesterday (18 Nov, spot at 1.2920) that GBP “could edge higher in the coming days and test the strong 1.2975 resistance”. However, GBP exceeded the 1.2975 level within hours as it popped to 1.2985 before easing off. While upward momentum has picked up, the prospect for GBP to move above last month’s peak at 1.3012 is still not that high. That said, GBP is expected to stay underpinned as long as it stays above 1.2875 in the coming days."