GBP/USD could attempt a test of 1.2360 – UOB

FX Strategists at UOB Group see the possibility that Cable could test the 1.2360 area in the very near term.

Key Quotes

24-hour view: “GBP traded between 1.2227 and 1.2324 before ending the day little changed at 1.2298 (-0.08%). The range was higher than our expected range of 1.2250/1.2360. The underlying tone has improved and GBP could edge higher towards 1.2360. For today, a clear break of this level is not expected (minor resistance is at 1.2330). Support is at 1.2270 followed by 1.2240″.

Next 1-3 weeks: “We have held a negative view on GBP since last Tuesday (24 Sep, spot at 1.2435) wherein we indicated “a short-term top is in place” and expected GBP to “trade sideways to lower”. We ‘upgraded’ the downside risk on Thursday (26 Sep, spot at 1.2360) and indicated GBP “could extend lower to 1.2250″. After GBP dropped to 1.2270 last Friday, we highlighted on Monday (30 Sep, 1.2295) that a “clear break of 1.2250 could lead to further weakness to 1.2205″. Our view for the past week was correct as GBP plummeted and touched 1.2205 yesterday. That said, the subsequent swift and sharp recovery was not exactly expected. The price action suggests that 1.2205 is a formidable support level and unless GBP can move and stay below 1.2250 within these few days, the prospect for sustained decline below 1.2205 is not high. On the upside, a break of 1.2390 (no change in ‘strong resistance’ level) would suggest that the past week weakness has stabilized”.