According to FX Strategists at UOB Group, Cable stays neutral for the time being while it could visit the 1.3660 area in the next weeks.
Key Quotes
24-hour view: “We expected another ‘down-leg’ towards 1.3750 yesterday but GBP traded mostly sideways instead (within a range of 1.3798/1.3876). Downward pressure has eased and indicators are mostly neutral now. GBP is likely to continue to trade sideways for now, likely within a 1.3800 and 1.3900 range”.
Next 1-3 weeks: “While we have held the same view that the pullback in GBP “has room to extend lower” to 1.3800 since last Tuesday (06 Feb, spot at 1.3960), the ease of which this strong support was taken out on Friday was unexpected. Despite the sharp decline, it appears premature to expect the start of a major bearish reversal but in view that GBP has rallied by more than 10 big figures from a low of 1.3027 (October last year) to a high of 1.4346 late last month, a deeper correction towards 1.3660 would not be surprising. This level is roughly about 50% retracement of the October to January rally and is also close to the rising trend-line support as well as the peak in Sep 2017. A clear break below this major support would suggest that the 1.4346 high is a more significant top than currently expected. Regardless, GBP is expected to continue to stay under pressure in the coming days unless it can move and stay above 1.3940 (key short-term resistance previously at 1.4100)”.
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