GBP/USD weakness seen limited to 1.3040 – UOB

Cable remains neutral in the short-term horizon, while a test of 1.3040 stays on the cards, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “We indicated yesterday that the major 1.3100/05 support appears to be ‘vulnerable’ and added a break of this level could lead to a drop to 1.3070. In line with expectation, GBP cracked 1.3100 before exceeding 1.3070 to hit an overnight low of 1.3050. While downward momentum is showing some signs of slowing, it is premature to expect a short-term low. From here, another test of the 1.3040/50 level would not be surprising but a break below the 1.3000 support seems unlikely, at least for today. Resistance is at 1.3110 but only a move back above 1.3140 would indicate that the current weakness has stabilized”.

Next 1-3 weeks: “As highlighted yesterday, GBP is under pressure but oversold conditions suggest that weakness could be limited to 1.3040. GBP subsequently dropped to an overnight low of 1.3050 before staging a mild recovery. While we continue to adopt a ‘negative’ GBP view for now, we do not see high odds for a period of sustained weakness. That said, an ‘overshoot’ below 1.3040 is not ruled out but at this stage, a break of 1.3000 would come as a surprise (at least within the next couple of days). On the upside, the ‘key resistance’ has moved lower from 1.3235 to 1.3190 and only a break of this level would indicate that the current weakness has stabilized”.