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In opinion of FX Strategists at UOB Group, Cable’s extra upside faces a tough barrier at the 1.3200 level.

Key Quotes

24-hour view: “We expected GBP to strengthen yesterday but were of the view that ‘overbought conditions suggest a clear break of 1.3200 is unlikely’. We highlighted that ‘last month’s peak at 1.3170 is already a solid resistance’. GBP subsequently popped to a high of 1.3185, dropped back down to 1.3108 before trading sideways for the rest of the sessions. Short-term momentum has more or less dissipated and for today, GBP is likely to consolidate and trade between 1.3090 and 1.3200.”

Next 1-3 weeks: “We have held a positive view in GBP for more than 2 weeks now and in our latest narrative from Monday (03 Aug, spot 1.3070), we indicated that waning momentum and overbought conditions suggest that ‘the rally in GBP could be coming to an end soon’. We added, ‘unless GBP moves and stays above 1.3170 within these few days, a breach of 1.2970 (‘strong support’ level previously at 1.2850) would indicate that the current positive phase in GBP has run its course’. GBP dropped to a low of 1.2982 on Tuesday before rebounding and is currently approaching 1.3170. From here, a break of this level would not be surprising but there is another strong resistance at 1.3200 and GBP has to move clearly above 1.3200 before further sustained advance can be expected. Overall, the positive phase is still intact and a break of 1.3200 would indicate that the next up-leg has started. Conversely, a breach of 1.3030 (‘strong support’ level previously at 1.2970) would indicate the recent advance in GBP has run its course. Looking forward, the next resistance above 1.3200 is at 1.3320.”