In opinion of FX Strategists at UOB Group, there is still scope for Cable to re-test the mid-1.3100s in the next weeks.
Key Quotes
24-hour view: “While GBP extended its gains as expected, the high of 1.3043 fell short of the 1.3070 level we were expecting. While upward momentum has eased, we still see chance for GBP to stage another leg higher to 1.3070 (before a deeper and more sustained pullback can be expected). For today, we do not expect a move beyond the next resistance at 1.3110. Support is at 1.2985 followed by the stronger level at 1.2945″.
Next 1-3 weeks: “We noted yesterday that further out, “it appears the current consolidation would be resolved by a break above 1.2960 but this is unlikely to happen so soon”. The break of 1.2960 happened way sooner than anticipated as GBP rocketed to a high of 1.3033 (after Barnier’s comments). Despite the strong surge, we are not ready to adopt a bullish stance just yet. That said, after the outsized rally, the pressure is clearly on the upside and we see room for further GBP strength to 1.3150. At this stage, the prospect for a clear break above this level is not high but it would continue to improve as long as GBP can hold above the ‘key support’ at 1.2930″.
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