GBP/USD reluctant to drop further – UOB

Further weakness in Cable looks unlikely for the time being, suggested GX Strategists at UOB Group.

Key Quotes

24-hour view: “Expectation for GBP to “extend its gain” did not materialize as it retreated after touching 1.2173 (the solid resistance highlighted at 1.2195 remains unchallenged). Momentum indicators have turned ‘neutral’ and the current movement is viewed as part of a consolidation phase. In other words, GBP is expected to trade sideways for now, likely within a 1.2100/1.2170 range”.

Next 1-3 weeks: “We highlighted that “shorter-term indicators continue to suggest that the odds for further GBP weakness have diminished” and added, “in order to revive the current flagging downward momentum, GBP has to move and stay below 1.2070 soon”. GBP subsequently dipped below 1.2070 (low of 1.2065) before soaring to 1.2180. From here, a break of 1.2195 (no change in ‘key resistance’ level) would suggest the ‘negative phase’ that started in late July has ended. While a break of 1.2195 would indicate that last week’s 1.2015 low is a short-term bottom, it is premature to expect a major reversal. To put it another way, a break of 1.2195 would indicate that GBP has moved into a consolidation phase and it is likely to trade sideways to slightly higher for a couple of weeks”.