In opinion of FX Strategists at UOB Group, the Cable now faces increasing chances of a move to 1.4080/50 in the near term.
24-hour view: “Our expectation for the ‘rebound in GBP to extend higher’ last Friday was incorrect as it dropped sharply to 1.4095 instead. Despite the relatively sharp drop, downward momentum has not improved by much. However, there is scope for GBP to test the major support at 1.4080. A dip below this level is not ruled out but the next support at 1.4050 is not expected to come into the picture. Resistance is at 1.4140 followed by 1.4160.”
Next 1-3 weeks: “Last Friday (11 Jun, spot at 1.4175), we indicated that GBP ‘does not appear to be ready to move lower in a sustained manner’ and we expected it to ‘trade within a relatively broad range of 1.4080/1.4220’. GBP subsequently dropped to 1.4095 and shorter-term downward momentum has improved somewhat. That said, it is premature to expect a sustained decline. From here, GBP has to close below 1.4080 before a move to 1.4050 can be expected (next support is at 1.4005). At this stage, the prospect for GBP to close below 1.4080 is not high but it would increase as long as GBP does not move above 1.4185 (‘strong resistance’ level) within these few days.”
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