United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann report GBP/USD’s sharp swing between 1.3275 and 1.3137 before closing at 1.3196. Short term, recovery is expected to extend toward 1.3260 but is unlikely to sustain above that level. Over the next one to three weeks, price action is viewed as range expansion, with the Pound likely confined between 1.3135 and 1.3280.

Pound trapped in broader range

“24-HOUR VIEW: After GBP rose to a high of 1.3259 two days ago, we indicated yesterday that “the advance has scope to extend, but with no significant increase in upward momentum, GBP may not break the major resistance at 1.3280.” We added, “to sustain the momentum, GBP must hold above 1.3230.” The subsequent price action did not unfold as expected. GBP rose to 1.3275 but then it plunged to a low of 1.3137. The decline was brief, as GBP rebounded strongly from the low to close at 1.3196 (-0.45%), with the recovery extending into the early Asian session today. The recovery could extend to 1.3260. Based on the prevailing momentum, a continued rise above this level is unlikely. On the downside, a breach of 1.3180 (minor support is at 1.3205) would mean GBP is more likely to range-trade rather than continuing to recover.”

“1-3 WEEKS VIEW: We highlighted on Monday (12 Oct, spot at 1.3235) that GBP “is expected to trade in a range between 1.3170 and 1.3280.” Yesterday, GBP rose close to 1.3280 with a high of 1.3275 before plummeting to a low of 1.3137. GBP rebounded sharply from the low. The price action did not result in any clear increase in downward momentum. The decline to 1.3137 appears to be more of a range expansion rather than the start of a sustained decline. From here, we expect GBP to trade between 1.3135 and 1.3280, and GBP must clearly break either of these levels before a more directional move can be expected.”