GBP/USD neutral now, likely to consolidate near term – UOB

Cable’s outlook has now shifted to neutral from bearish and could likely move into a consolidative theme in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We anticipated GBP to move higher yesterday but highlighted “1.2780 is expected to offer stiff resistance” and added, “a move beyond the next resistance at 1.2810 is not expected”. GBP subsequently hit an overnight high of 1.2799 before ending the day on a solid note (NY close of 1.2799). From here, a move above 1.2810 would not be surprising but the next strong resistance at 1.2860 is likely out of reach (minor resistance is at 1.2830). On the downside, we expect 1.2730 to be strong enough to hold any intraday pull-back (minor support is at 1.2765)”.

Next 1-3 weeks: “We have warned of the “increasing risk of an interim low” since last Thursday (16 Aug, spot at 1.2700) and the break of the 1.2780 ‘stoploss’ during NY session yesterday finally confirms that GBP has found a bottom at 1.2662 last week. In other words, the outlook for GBP has shifted from bearish to neutral. From here, we view the current price action as the early stages of a consolidation phase and expect GBP to trade sideways. That said, shorter-term indicators are on the positive side and the immediate bias is for GBP to probe the top of the expected 1.2700/1.2960 consolidation phase”.