Cable’s downside carries the potential to extend towards the mid-1.2700s, according to FX Strategists at UOB Group.
Key Quotes
24-hour view: “The anticipated weakness in GBP exceeded our expectation as it easily took out the 1.2835/40 support and even came close to cracking the next major support at 1.2790 (low of 1.2795). While the severely oversold, the recent steep drop is not showing sign of stabilizing just yet and the immediate risk is still on the downside. That said, it is highly unlikely that GBP can maintain the pace of its recent decline. A from here, a move below 1.2790 would not be surprising but the next support at 1.2750 is likely out of reach for now. Resistance is at 1.2850 but only a break of 1.2880 would indicate that the current weakness has stabilized”.
Next 1-3 weeks: “We highlighted yesterday, “there is no sign that GBP is ready for a bottom just yet and the next level to focus on is at 1.2790″. However, the subsequent rapid pace of decline that hit a low of 1.2795 was not exactly expected. We still see 1.2790 as a strong support and while
a dip below this level is not ruled, severely oversold short-term conditions could ‘limit’ any further weakness to 1.2750. All in, GBP is expected to remain under pressure until it can reclaim the ‘key resistance’ at 1.2920 (level previously at 1.2990). Looking ahead, only a daily closing below 1.2750 would suggest that GBP is ready to tackle the year’s low at 1.2662″.
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