Cable remains under pressure and could spark a correction lower to the 1.2880 area, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “We anticipated GBP to “dip below last month’s 1.2958 low” yesterday but the break of the next support at 1.2930 was not exactly expected (low of 1.2920). While clearly in oversold territory, there is no sign of stabilization just yet and the immediate risk for GBP is still on the downside. From here, barring a break of 1.2995, we expect GBP to grind lower to the next support at 1.2905. At this stage, a break of the next major support at 1.2880 would come as a surprise”.
Next 1-3 weeks: “We have held the same view since last Friday (03 Aug, spot at 1.3015) wherein a “dip below the July’s 1.2958 low would not be surprising” and “the prospect for a sustained move below the next support at 1.2880 is not high”. The pace of the expected weakness in GBP has been faster than anticipated as it dropped sharply to a low of 1.2920 yesterday (Monday, 06 Aug). Downward momentum has increased further and the immediate risk is still on the downside. What is not clear is whether the current pace of weakening in GBP can be sustained. That said, we continue to expect GBP to stay under pressure until it can reclaim the ‘key resistance’ at 1.3050 (level was at 1.3100 yesterday). On the downside, support is at 1.2880 and a clear break of this strong level would greatly increase the odds for further GBP weakness towards the next major support at 1.2775″.
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