The British Pound (GBP) is poised for a potential rebound against the US Dollar (USD), although analysts anticipate that any upward movement will likely be capped around the 1.3340 level. According to FX strategists Quek Ser Leang and Peter Chia at UOB Group, the longer-term momentum that previously supported the Sterling has waned. They foresee the GBP trading within a defined range of 1.3140 to 1.3405 in the coming weeks, reflecting a period of consolidation.
Buildup in momentum has faded
SHORT-TERM OUTLOOK: “The Pound Sterling experienced a decline to 1.3140 on Monday. On Tuesday, with the GBP trading at 1.3180, our analysis suggested a potential retest of the 1.3140 level before a more substantial recovery could materialize. However, the currency bypassed this retest, instead staging a direct rebound to 1.3316, ultimately closing the session on a strong note at 1.3304, marking a 0.96% increase. Looking ahead, the GBP may continue its upward trajectory today, but given that conditions are nearing overbought territory, any further gains are expected to be limited to a test of the 1.3340 resistance. The more significant resistance level at 1.3405 is unlikely to be challenged in the near term. Immediate support lies at 1.3275; a break below 1.3245 would signal a weakening of the current upward pressure.” This analysis reflects short-term technical considerations, with traders closely monitoring overbought conditions and key support levels to gauge the sustainability of the rebound.
MEDIUM-TERM PERSPECTIVE: “Our outlook on the GBP turned negative last Friday, May 9th, when the spot price was at 1.3240. At that time, we cautioned that ‘it is unclear whether GBP can break clearly below 1.3150.’ Following the subsequent drop to 1.3140, we noted on May 13th, with the spot price at 1.3180, that the GBP ‘is expected to weaken, but the major support at 1.3070 may not come into view so soon.’ The subsequent sharp rebound to 1.3316 was unexpected. The breach of our ‘strong resistance’ level at 1.3275 indicates that the previously building momentum has dissipated. The current price action suggests that the GBP is now likely to trade within a defined range of 1.3140 to 1.3405.” This revised outlook suggests a period of range-bound trading for the GBP/USD pair, with the analysts acknowledging the unexpected strength of the recent rebound and adjusting their expectations accordingly. Market participants will be closely watching for any sustained breakouts from this range to determine the next directional move. Furthermore, upcoming economic data releases from both the UK and the US will likely play a crucial role in shaping the pair’s trajectory.
