GBP/USD could advance on a more sustainable fashion once 1.2550 is cleared, suggest UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Our view for GBP to drop further was incorrect as it rebounded strongly and retraced more than Tuesday’s entire drop (to a high of 1.2516). Despite the advance, there is no significant increase in momentum and instead of strengthening much further, GBP is more likely to trade sideways in 1.2420/1.2520 range.”

Next 1-3 weeks: “Yesterday (26 Apr, spot at 1.2415), we highlighted that ‘while the downward risk is beginning to build, GBP has to break and stay below 1.2345 before a sustained decline is likely’. We added, ‘the chance of GBP breaking clearly below 1.2345 will increase as long as it stays below 1.2490 in the next few days’. We did not expect the strong bounce that took out our ‘strong resistance’ level of 1.2490 (high of 1.2516). Despite the advance, upward momentum has not improved much. In order to advance in a sustained manner, GBP has to break and stay above 1.2550. The likelihood of GBP breaking clearly above 1.2550 will remain intact as long as it does move below 1.2370. Looking ahead, the next resistance level above 1.2550 is at 1.2665.”