The British Pound (GBP) is expected to trade within a specific range against the US Dollar (USD) in the near term. Analysts from UOB Group indicate that any upward movement in GBP/USD is likely to remain confined between 1.3290 and 1.3390. This outlook suggests limited directional momentum for the currency pair in the immediate future.
While a potential rebound exists, the broader downward trend for GBP has not entirely dissipated. Experts suggest that the currency could still fall to the 1.3200 level over a slightly longer period.
Key Takeaways
- GBP/USD is predicted to trade within a 1.3290/1.3390 range.
- Downward momentum for GBP has slowed but remains a factor.
- The 1.3200 level is a potential target for further declines.
- A breach above 1.3410 would signal a shift in the bearish outlook.
Short-Term Outlook: Confined Movement
UOB Group's FX analysts, Quek Ser Leang and Peter Chia, provided a detailed 24-hour view on the GBP/USD pair. Last Friday, when the Pound was at 1.3300 in early Asian trading, they had anticipated continued declines despite oversold conditions. However, they questioned if it would reach 1.3245 that day, noting that any recovery would likely stay below 1.3370.
The Pound indeed dropped to a low of 1.3261. Following this, it experienced a sharp rise during the New York trading session, reaching a high of 1.3370. This movement confirmed the analysts' expectation of a cap on upward momentum.
"While GBP could rebound further today, any advance is likely part of a 1.3290/1.3390 range. In other words, EUR is unlikely to break clearly below 1.3290 or above 1.3390," stated the UOB Group analysts.
This suggests that traders should prepare for sideways movement, with strong resistance and support levels defining the currency's path. The identified range indicates that significant breakouts are not expected in the very short term.
Currency Fact
The GBP/USD pair is one of the most actively traded currency pairs globally, often referred to as 'Cable'. Its movements are influenced by economic data from both the UK and the US, including interest rate decisions, inflation reports, and employment figures.
Medium-Term Perspective: Downward Pressure Lingers
Looking at the 1-3 week timeframe, the UOB Group analysts highlighted increased downward momentum last Friday (October 10), when the spot price was 1.3300. This was primarily due to a sharp decline observed on the preceding Thursday.
The technical target for this period was set at 1.3200. Although the subsequent recovery has somewhat eased the immediate downward pressure, the possibility of the Pound reaching this lower target still exists. This indicates that while short-term bounces may occur, the underlying trend remains bearish over the medium term.
Understanding Currency Momentum
Currency momentum refers to the rate of change in a currency's price. Strong momentum, either upward or downward, suggests that the price is moving quickly in one direction. When momentum slows, it indicates that the rate of price change is decreasing, often preceding a consolidation phase or a reversal.
Key Resistance Levels to Watch
For the Pound to escape its current bearish outlook and invalidate the 1.3200 target, it would need to break above a significant resistance level. The UOB Group analysts maintained their 'strong resistance' level from the previous Friday at 1.3410.
A sustained move above 1.3410 would suggest a notable shift in market sentiment. Until this level is breached, the risk of further declines towards 1.3200 remains a key consideration for investors and traders. This technical barrier represents a critical point for the currency's future direction.
- Current Range: 1.3290 - 1.3390
- Potential Downside Target: 1.3200
- Strong Resistance: 1.3410
The market will be closely watching macroeconomic data from both the UK and the US in the coming weeks. Any unexpected economic news could influence the Pound's trajectory and potentially trigger a breakout from the predicted range or accelerate a move towards the 1.3200 target.
