GBP/USD still poised for further decline – UOB

In opinion of FX Strategists at UOB Group, Cable remains neutral and expects extra downside to remains on the cards in the near term.

Key Quotes

24-hour view: “Expectation for GBP to “grind lower towards 1.3980” was incorrect as it rebounded strongly after failing to break clearly below the 1.3920 support (low of 1.3919). GBP is deemed to have made a short-term low and the current rebound has room to extend higher but a break of the strong 1.4040 resistance seems unlikely (minor resistance is at 1.4020). On the downside, we do not expect 1.3920 to come into the picture for today, 1.3940 is already a relatively strong support”.

Next 1-3 weeks: “We highlighted yesterday that a clear break of 1.3965 “would shift the focus to 1.3900”. However, the continuing decline in GBP that quickly took out this support level was not exactly expected (low of 1.3928). The price action for the past several days (GBP closed lower for the fifth consecutive day yesterday) suggests that further weakness still seems likely. From here, a break below 1.3900 would open up the way for a move to 1.3800. At this stage, the odds for a move to last month’s 1.3712 low are not high. On the upside, the ‘key resistance’ is at 1.4040 now (from 1.4130 yesterday) and only a break of this level would indicate that the current weakness has stabilized”.