GBP/USD now targets the 1.2340 area – UOB

The bearish view on the Sterling suggests Cable could slip further back and test the 1.2340 region in the short-term.

Key Quotes

24-hour view: “While we expected GBP to weaken yesterday, the manner by which it crashed through several strong support levels with ease came as a surprise (overnight low of 1.2396). The rapid drop appears to be running ahead of itself but as there is no sign of stabilization just yet, GBP could weaken further to 1.2365. Only a move back above 1.2460 would indicate that the weakness in GBP has stabilized (minor resistance is at 1.2440)”.

Next 1-3 weeks: “We indicated yesterday (16 Jul, spot at 1.2515) that “a dip below 1.2470 is not ruled but GBP has to register a NY closing below 1.2440 in order to indicate that it is ready to move below the year-to-date low near 1.2410”. However, the rapid pace of how the price action evolved was unexpected as GBP plunged to a 27-month low of 1.2396 (before closing -0.89% lower at 1.2405, the largest 1-day decline in almost 4 months). The sharp decline indicates that the ‘sideway-trading phase’ that started last Friday (12 Jul, spot at 1.2525) has ended earlier than expected. From here, GBP is deemed to have move into a ‘negative phase’ and could move to 1.2340. On the upside, only a break of the 1.2490 ‘key resistance’ would indicate that the current downward pressure has eased. On a shorter-term note, 1.2460 is already a strong resistance level”.