Cable has moved into a consolidation phase although it could still test the 1.2580 area, suggested FX Strategists at UOB Group.
Key Quotes
24-hour view: “Yesterday, we expected GBP to “trade sideways to slightly higher within a 1.2450/1.2530 range”. However, the price action was against our view as GBP dropped rapidly to an overnight low of 1.2399. The recent strong upward pressure has dissipated and the current movement is still viewed as part of a broader consolidation phase. For today, GBP is expected to trade sideways, likely between 1.2380 and 1.2470”.
Next 1-3 weeks: “While we indicated last Friday (13 Sep, spot at 1.2330) that “we are not ruling out further GBP strength” and “GBP could be ready to move out the ‘range trading phase’ over the past few days”, the manner by which GBP blew past several strong resistance levels with ease and rocketed to a high of 1.2506 came as a surprise (GBP gained +1.37% last Friday, the largest 1-day advance since March this year). The recovery that started more than a week ago (05 Sep, spot at 1.2245) has moved into a new phase and we see room for GBP to test 1.2580 from here even though it is unlikely able to maintain the pace of its current advance. On the downside, only a break of 1.2350 (strong support level was at 1.2235 last Friday) would indicate that GBP strength has run its course”.
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