There is no significant increase in momentum. The Pound Sterling (GBP) is likely to trade sideways between 1.2970 and 1.3045. Upside risk in GBP remains intact; overbought conditions suggest it might not reach 1.3100 this time around, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

Overbought conditions suggest GBP might not reach 1.3100

24-HOUR VIEW: “We expected GBP to trade in a range of 1.2940/1.2995 yesterday. Our expectation was incorrect, as GBP soared to a high of 1.3043, and then pulled back, closing at 1.3008 (+0.27%). Despite the advance, there is no significant increase in upward momentum, and GBP is unlikely to rise much further. Today, GBP is more likely to trade sideways between 1.2970 and 1.3045.”

1-3 WEEKS VIEW: “Two weeks ago, on 04 Jul, when GBP was trading at 1.2745, we pointed out that ‘the risk for GBP has shifted to the upside’ (see chart below). As GBP rose, we have been providing frequent guidance, and in our latest narrative from two days ago (16 Jul, spot at 1.2970), we indicated that GBP ‘must break above 1.3000 before further advance can be expected.’ We also highlighted that ‘the next level to watch above 1.3000 is at 1.3045.’ After trading below 1.3000 for a couple of days, GBP surged above this level yesterday, and came close to reaching 1.3045 (high of 1.3043). While the outlook remains positive, conditions are severely overbought, and GBP might not reach 1.3100 this time around. All in all, only a breach of 1.2940 (‘strong support’ level previously at 1.2900) would mean that GBP is not rising further.”