GBP/USD still neutral, extra pullbacks likely – UOB
|FX Strategists at UOB Group remain neutral on Cable and did not rule out further downside.
Key Quotes
24-hour view: “We expected further weakness in GBP yesterday but the ease of which the strong 1.3965 support was taken out came as a surprise (low of 1.3928). The sharp decline over the past few days is clearly over-extended but with no sign of stabilization just yet, it is too soon to expect a recovery. From here, we expect GBP to grind lower towards the next support at 1.3890 (1.3920 is a relatively strong intervening support). Stabilization is only upon a move back above 1.4005 (minor resistance is at 1.3975)”.
Next 1-3 weeks: “We highlighted yesterday that a clear break of 1.3965 “would shift the focus to 1.3900”. However, the continuing decline in GBP that quickly took out this support level was not exactly expected (low of 1.3928). The price action for the past several days (GBP closed lower for the fifth consecutive day yesterday) suggests that further weakness still seems likely. From here, a break below 1.3900 would open up the way for a move to 1.3800. At this stage, the odds for a move to last month’s 1.3712 low are not high. On the upside, the ‘key resistance’ is at 1.4040 now (from 1.4130 yesterday) and only a break of this level would indicate that the current weakness has stabilized”.
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