FX Strategists at UOB Group noted the outlook for Cable now points to further declines in the near-term.
24-hour view: “Yesterday, we expected GBP to ‘trade within a 1.4135/1.4200 range’. GBP subsequently tested the top of the expected range (high of 1.4202) before staging a surprisingly sharp and rapid drop to 1.4085. The rapid drop appears to be running ahead of itself and while GBP could dip below 1.4085, the next support at 1.4050 is unlikely to come under threat. Resistance is at 1.4125 followed by 1.4150.”
Next 1-3 weeks: “We highlighted yesterday that GBP ‘has to close above 1.4250 or below 1.4090 before a more directional price action can be expected’. GBP subsequently plummeted to 1.4085 before closing on a weak note at 1.4089 (-0.56%). While the risk for GBP has shifted to the downside, it may take a while before GBP could move below 1.4050. That said, if GBP closes below 1.4050, it could potentially lead to a rapid decline towards the next support at 1.4000. Resistance is at 1.4150 but only a break of 1.4180 (‘strong resistance’ level) would indicate that the downside risk has dissipated.”
