FX Strategists at UOB Group stay neutral on Cable and expect it to remain rangebound in the next weeks.
Key Quotes
24-hour view: “Instead of consolidating and trading sideways (as expected yesterday), GBP dropped sharply to a low of 1.3100 and ended the day on a weak note (NY close of 1.3111). Despite the relatively large drop, downward momentum has not improved all that much. However, the immediate risk is on the downside and a break of the early Monday low of 1.3080 seems likely. That said, the next support at 1.3035 is unlikely to come into the picture. Resistance is at 1.3145 followed by 1.3185″.
Next 1-3 weeks: “While we highlighted yesterday, “we have doubts about the sustainability of further short-term GBP strength”, the subsequent sharp pullback in GBP that erased most of the rebound from Monday’s 1.3080 low was not exactly expected. The price action reinforces our view that GBP is trading sideways within a consolidation range but we have underestimated the volatility. From here, we expect GBP to trade with a negative bias but any weakness is viewed as part of 1.3000/1.3250 range. Looking ahead, a clear break of 1.3000 would suggest GBP is ready to tackle the 1.2922 low seen earlier this month”.
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