GBP/USD: Further gains likely above 1.2745 – UOB

24-hour view: We expected GBP to trade in a range of 1.2655/1.2720 last Friday. However, after dipping to a low of 1.2612, GBP soared and ended the day on a strong note at 1.2709 (+0.65%). The sharp and swift rise appears to be running ahead of itself, and GBP is unlikely to strengthen much further. Today, GBP is more likely to trade sideways at these higher levels, probably between 1.2650 and 1.2725. 

Next 1-3 weeks: Last Thursday (30 Nov, spot at 1.2695), we indicated that “there is room for it to advance to 1.2745 before the risk of a pullback increases.” After GBP pulled back sharply to 1.2604, we indicated on Friday (01 Dec, spot at 1.2635) that unless GBP breaks above 1.2690 in the next couple of days, a breach of the ‘strong support’ at 1.2600 would not be surprising and would mean the start of a deeper pullback. We did not quite anticipate GBP to rebound strongly to 1.2716. Upward momentum received a boost, albeit not much. From here, GBP has to break and stay 1.2745 before further advance to 1.2795 is likely. To keep the momentum going, GBP must not break 1.2620 (‘strong support’ level previously at 1.2600).