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Cable remains under pressure and could slip back to the 1.20 region in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “The sharp sell-off in GBP amid oversold conditions came as a surprise (GBP lost -1.08% as it closed at 1.2101 last Friday). Conditions remain oversold but robust momentum suggests the decline in GBP could probe the 1.2065 support first before stabilization can be expected (next support is further down at 1.2000). On the upside, only a move above 1.2165 (minor resistance is at 1.2140) would indicate the current weakness has stabilized.”

Next 1-3 weeks: “We have held a negative view in GBP since last Tuesday (12 May, spot at 1.2315) when we indicated that ‘a NY close below 1.2240 would indicate the start of a sustained decline’. However, we underestimated the pace of the pick-up in momentum as we highlighted on Friday (15 May, spot at 1.2225) that ‘while the outlook for GBP is still negative, the prospect for further decline to 1.2100 is not high’. However, GBP plummeted and touched 1.2100 during NY hours on Friday before ending the day on weak note at 1.2101 (-1.08%). From here, oversold short-term conditions could slow the pace of any further decline but barring a move above 1.2230 (‘strong resistance’ level was at a much higher level of 1.2355 lasts Friday), GBP is likely to weaken further to 1.2000.”