In opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, GBP/USD could now attempt a move to the 1.2600 zone in the next weeks.

Key Quotes

24-hour view: “Yesterday, we expected GBP to ‘extend its gains’ but we were of the view that ‘the major resistance at 1.2400 is not expected come into the picture’. The anticipated GBP strength exceeded our expectations by a wide margin as GBP cracked 1.2400 and rocketed to 1.2498. The deeply overbought rally could extend further but it is unlikely able to maintain a foothold above 1.2550 (next resistance is at 1.2600). On the downside, a breach of 1.2420 (minor support is at 1.2450) would indicate that the current upward pressure has eased.”

Next 1-3 weeks: “We highlighted yesterday (17 May, spot at 1.2325) that the ‘the recent weak phase has come to an end and there is room for the current rebound to extend’. While our view for a rebound turned out to be correct, the anticipated strong resistance at 1.2400 did not materialize as GBP lifted off and rocketed by 1.42% (close of 1.2495), its biggest 1-day gain since Oct 2020. The strong boost in momentum suggests there is room for GBP to advance further to 1.2600. At this stage, it is premature to expect a break of the early May high near 1.2640. On the downside, the ‘strong support’ level at 1.2360 is unlikely to come under threat, at least within these couple of days.”