In opinion of FX Strategists at UOB Group, the outlook on Cable remains negative and still targets the sub-1.2000 area.
Key Quotes
24-hour view: “In comparison, GBP is the most ‘stable’ currency in G-10 these few days. Strong support at 1.2100 held for a third day while 1.2190 limited price gains. There’s little to suggest that a breakout either ways is coming until either levels give way. That said, the next breakout is likely a strong one given the price actions elsewhere”.
Next 1-3 weeks: “While we held the view yesterday (30 Jul, spot at 1.2225) that GBP has moved into a ‘negative phase’ and that it “could trade to 1.2110″, the subsequent rapid pace of decline was not exactly expected (GBP plunged to an overnight low of 1.2120). The downward acceleration over the past couple of days could be attributed to the lack of significant support levels. From here, if GBP were to crack 1.2110, it could lead to further steep decline as the next support is more than 100 pips lower at 1.1985. That said, 1.1985 is just a minor low in Jan 2017 (on the weekly chart) and it is left to be seen how much support it can offer (if GBP were to move to this level). Below this level, the more significant support would be the Oct 2016 ‘flash crash’ low of 1.1491. All in, despite being oversold, the current weakness in GBP is not showing sign of stabilizing just yet. Only a break of the 1.2260 ‘key resistance’ (level was at 1.2295 yesterday) would suggest that the decline in GBP is ready to take a breather.”
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