Cable’s outlook remains fragile and could re-test the 1.3715 level in the next weeks, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “Yesterday, we expected GBP to ‘dip below 1.3790’ but we were of the view ‘the major support at 1.3750 is not expected to come into the picture’. Our view was not wrong as the decline in GBP stopped at 1.3753. Despite the decline, downward momentum has not improved by all that much. That said, it is too soon to expect a recovery. For today, GBP could edge lower but the major support at 1.3715 is likely out of reach. On the upside, a break of 1.3815 (minor resistance is at 1.3790) would indicate that the current downward pressure has eased.”
Next 1-3 weeks: “We indicated on Wednesday (30 Jun, spot at 1.3840) that ‘downward momentum is beginning to improve but only a NY closing below 1.3790 would indicate the start of a fresh weak phase in GBP’. That said, we did not quite anticipate the sharp drop in GBP to 1.3753 yesterday (01 Jul) and the weak closing at 1.3764. The price actions suggest that GBP has moved into a weak phase. In view of the rapid improvement in momentum, a break of 1.3750 would not be surprising. The next level to focus on below 1.3750 is at 1.3715. Looking ahead, the next major support is at 1.3670. The weak phase is deemed intact as long as GBP does not move above 1.3845 (‘strong resistance’ level was at 1.3905 yesterday).”
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