The upside momentum in GBP/USD could lose some traction if 1.2540 is breached in the near term, according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the pullback in GBP could extend but any decline is viewed as a lower range of 1.2575/1.2655’. W added, ‘GBP is unlikely to drop below 1.2575 in a sustained manner’. While GBP declined as expected, it rebounded from a low of 1.2580. The price actions appear to be part of a consolidation and GBP is likely to trade in a range today, expected to be between 1.2585 and 1.2655.”

Next 1-3 weeks: “Our update from yesterday (09 May, spot at 1.2615) is still valid. As highlighted, overbought short-term conditions suggest GBP could stay below the recent high of 1.2668 for 1-2 days. Overall, only a breach of 1.2540 (no change in ‘strong support’ level from yesterday) would indicate that the GBP strength that started late last week is unlikely to reach 1.2720 this time around.”