GBP/USD needs to break above the 1.2270 level to allow for extra gains 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 GBP ‘may continue to trade sideways but a breach of the 1.2200 resistance could potentially lead to a sharp rise to 1.2270’. While GBP took out 1.2200, the anticipated sharp rise did not materialize as GBP traded choppily in NY session (high has been 1.2248). Upward momentum has improved a tad but while GBP is likely to trade with an upward bias, it is unlikely to break 1.2270 today. Support is at 1.2175, followed by 1.2140.”

Next 1-3 weeks: “On Tuesday (10 Jan, spot at 1.2180), we highlighted that the odds of GBP breaking the major resistance have increased. While GBP has not been able to make much headway on the upside, we continue to hold the same view for now. However, in order to keep the momentum going, GBP must break 1.2270 these 1-2 days or the prospect of further GBP strength would diminish quickly. Conversely, a break of 1.2100 (‘strong support’ level was 1.2050 yesterday) would indicate that GBP is not advancing further. Looking ahead, above 1.2270, there is a significant resistance level at 1.2305.”