British Pound: Pullback seen within 1.3400–1.3475 band against US Dollar – UOB

United Overseas Bank’s (UOB) Quek Ser Leang notes GBP/USD reversed after an overbought spike to 1.3506, closing lower at 1.3434. The strategist sees scope for the pullback to extend but mainly within a 1.3400–1.3475 range, with a sustained drop below 1.3400 unlikely. Over 1–3 weeks, strong momentum still suggests upside, though odds of a break above 1.3555 have diminished.

Overbought rally gives way to range

"24-HOUR VIEW: While we indicated yesterday that the sharp rise in GBP from last Friday “has scope to extend,” we pointed out that “overbought conditions could limit any gains to a test of 1.3520.” We were also of the view that “the major resistance at 1.3555 is not expected to come into view.” However, after popping to a high of 1.3506 on the open, GBP pulled back to a low of 1.3418. GBP closed 0.35% lower at 1.3434. This time around, the pullback has scope to extend, but given that there has been no clear increase in downward momentum, any decline is likely part of a lower range of 1.3400/1.3475. In other words, a sustained drop below 1.3400 is unlikely."

"1-3 WEEKS VIEW: GBP rose sharply last week. Yesterday (03 Aug, spot at 1.3485), we indicated that “while strong momentum suggests further upside, it remains to be seen whether GBP can break and hold above the significant resistance at 1.3555.” We added, “to sustain the momentum, GBP must hold above the ‘strong support’ level, currently at 1.3385.” While we continue to hold the same view, after the subsequent pullback, the odds of GBP rising to 1.3555 have diminished."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)