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UOB Group’s FX Strategists noted a sustained drop below 1.3580 in Cable is not favoured in the short-term horizon.

Key Quotes

24-hour view: “GBP dropped to 1.3566 yesterday before staging a robust rebound that sent it back up to 1.3698. The sharp and rapid advance is overbought but there is scope for GBP to test 1.3710 first before a pullback can be expected. For today, the major resistance at 1.3760 is unlikely to come into the picture. Support is at 1.3645 followed by 1.3610.”

Next 1-3 weeks: “We have held the same view since last Thursday (28 Jan, spot at 1.3665) where we highlighted that ‘the bias is tilted to the downside but any weakness is viewed as part of a 1.3580/1.3760 range’. We expected GBP to drift lower but were of the view that ‘a sustained decline below 1.3580 is unlikely’. However, we did not quite anticipate the drop to 1.3566 yesterday (04 Feb) and the subsequent sharp bounce. The price actions have clouded the outlook and only a clear break (daily closing) below 1.3580 or above 1.3760 would indicate that GBP is ready for a sustained directional move.”