In opinion of FX Strategists at UOB Group, Cable’s upside momentum could test higher levels as long as it trades above 1.3895 in the near term.
24-hour view: “While we expected a higher GBP yesterday, the pace and strength of the up-move came as a surprise. The rally not only moved above 1.3930 but broke above the strong 1.3960 resistance (high of 1.3994). Upward momentum remains strong and further strength towards 1.4020 would not be surprising. However, the next major 1.4070 resistance is not expected to come into the picture. Support is at 1.3930 but only a move back below 1.3895 would indicate that a short-term top is in place”.
Next 1-3 weeks: “The undertone in GBP improved further as it extended its up-move and touched an overnight high of 1.3994. This level is just below the top of our expected 1.3800/1.4000 consolidation range. An intraday move above 1.4000 would not be surprising but GBP has to close above this level to indicate the start of a sustained rebound. In the meanwhile, the current mild upward pressure would continue to improve as long as 1.3895 is intact”.
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