According to UOB’s Quek Ser Leang, GBP/USD’s strong six-day advance to 1.3385 looks overstretched, but there is still scope for a retest of 1.3385 in the near term, with support at 1.3325/1.3300. Over one to three weeks, as long as strong support at 1.3265 holds, the pair could extend gains toward 1.3410.

Overbought but further gains possible

“24-HOUR VIEW: After GBP rose more than we expected two days ago, we highlighted the following yesterday: “Upward momentum has increased further, but not significantly. Today, GBP could test 1.3305 before the risk of a pullback increases. We do not expect the major resistance at 1.3355 to come into view.” Our directional view was incorrect, but we underestimated the upward momentum, as GBP broke above 1.3355 and surged to a high of 1.3385. GBP pulled back from the high to close at 1.3347 (+0.57%). The strong advance appears to be overstretched, but there is still a chance for GBP to retest 1.3385 before the risk of a more sustained and sizeable pullback increases. This time around, we do not expect 1.3410 to come into view. Support is at 1.3325, followed by 1.3300.”

“1-3 WEEKS VIEW: On Tuesday (30 Jun, spot at 1.3255), we indicated that “while GBP could rebound further, it is currently unclear whether any advance can reach 1.3355.” GBP subsequently edged higher, but yesterday, it surged and broke above 1.3355, before closing higher for the sixth straight day at 1.3347 (+0.57%). After rising for several days, the advance in GBP is overbought. However, as long as the ‘strong support’ at 1.3265 (level was at 1.3200 yesterday) holds, GBP could rise further and test 1.3410.”

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