In opinion of FX Strategists at UOB Group, Cable could move into a consolidative phase in the short-term horizon.
24-hour view: “While we expected GBP to weaken yesterday, we were of the view that the ‘major support at 1.3900 is not expected to come into the picture’. However, GBP dipped slightly below 1.3900 (low of 1.3896) before recovering. Downward momentum is beginning to slow and this coupled with oversold conditions suggests that the chance for a sustained decline below 1.3900 is not high. That said, it is too soon to expect a sizeable recovery. For today, GBP is more likely to consolidate and trade within a 1.3890/1.3980 range.”
Next 1-3 weeks: “We noted yesterday that ‘downside risk remains intact but the prospect of GBP breaking the major long-term support at 1.3900 is not high for now’. However, GBP dipped slightly below 1.3900 (low of 1.3896) before recovering. Further GBP weakness is not ruled out but oversold short-term conditions could lead to 1 to 2 days of consolidation first. Looking ahead, the next support level of note is at 1.3840. Overall, the downside risk in GBP remains intact unless it can move above 1.4010 (‘strong resistance’ level was at 1.4100 yesterday).”
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