GBP/USD faces extra gains above 1.3280 – UOB

FX Strategists at UOB Group noted Cable is expected to move into a positive phase once 1.3280 is cleared.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the rapid decline in GBP appears to have enough impetus to extend lower to 1.3060 but a sustained decline is unlikely’. While our view was not wrong as GBP dropped to a low of 1.3065, the sharp and swift rebound during NY hours that sent GBP soaring to high of 1.3226 was unexpected. The rapid rebound appears to be running ahead of itself but GBP appears to have enough momentum to extend higher. That said, the odds for a sustained rise above the Wednesday’s peak at 1.3266 are not high (minor resistance is at 1.3240). Support is at 1.3165 followed by 1.3130.”

Next 1-3 weeks: “Yesterday (20 Aug, spot at 1.3110), we indicated that a ‘short-term top is in place’ and expected GBP to ‘trade between 1.3000 and 1.3230’. We added, ‘while GBP is likely to trade below 1.3266 for now, it is premature to expect the start of a major reversal’. GBP subsequently dropped to 1.3065 before staging a surprisingly strong rebound back to a high of 1.3226. The strong bounce has resulted in a quick pick-up in momentum but we are not convinced that GBP is about to move into a fresh positive phase just yet. Only a daily closing above 1.3280 would indicate that GBP is ready to tackle the major resistance at 1.3340. At this stage, the prospect for such a move is deemed as low but it would increase as long as GBP does not move below 1.3100 within these few days.”