24-hour view: Last Friday, GBP rose sharply to a high of 1.2709. Yesterday (Monday), we indicated that “the sharp and swift rise appears to be running ahead of itself, and GBP is unlikely to strengthen much further.” We expected GBP “to trade sideways between 1.2650 and 1.2725.” GBP then rose to a high of 1.2724 before staging a surprisingly sharp decline to 1.2605. The increase in momentum suggests there is room for GBP to decline further to 1.2590 before the risk of a rebound increases. The major support at 1.2505 is not expected to come into view. On the upside, if GBP breaks above 1.2680 (minor resistance is at 1.2650), it would mean that it is not declining further.

Next 1-3 weeks: Last Thursday (30 Nov, spot at 1.2695), we indicated that “there is room for GBP to advance to 1.2745 before the risk of a pullback increases.” After GBP rebounded to a high of 1.2709 on Friday, we noted yesterday (04 Dec, spot at 1.2695) that “there is a mild boost in momentum.” However, we were of the view that GBP “has to break and stay above 1.2745 before further advance to 1.2795 is likely.” GBP did not break 1.2745. Instead, it fell and broke below our ‘strong support’ level of 1.2620 (low of 1.2605). Upward momentum has faded, and GBP appears to have entered a consolidation phase. From here, GBP is likely to trade in a sideways range of 1.2505/1.2725.