Further weakness in GBP lost traction – UOB

The bearish momentum in Cable appears to have been losing momentum in past sessions and is now posed to attempt some consolidation, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our view for a stronger GBP was correct, the subsequent strength exceeded our expectation as it surged above 1.2360 and touched an overnight high of 1.2413. However, the up-move was short-lived as GBP surrendered most of it gains. The rapid swings have resulted in a mixed outlook and GBP could continue to trade in a volatile manner and within a broad range (expected to be between 1.2265 and 1.2400)”.

Next 1-3 weeks: “We have held a negative view in GBP since early last week but after the brief drop to 1.2205 on Tuesday and the subsequent rapid rebound, we highlighted on Wednesday (02 Oct, spot at 1.2290) that “1.2205 is a formidable support” and added, the “prospect for a sustained decline below this level is not high”. GBP surged above our 1.2390 ‘strong resistance’ yesterday (03 Oct) and the week-long weakness in GBP is deemed to have stabilized. That said, it is premature to expect a sustained recovery. For the next couple of weeks, GBP is expected to trade sideways and the recent elevated volatility suggests it could trade in a wide range of 1.2235/1.2460″.