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In opinion of FX Strategists at UOB Group, Cable remains in a negative phase and could drop further to the 1.2110 region in the near term.

Key Quotes

24-hour view: “Yesterday, we were of the view the decline in GBP “has scope to test 1.2340″. However, GBP abruptly accelerated downwards and sliced through several strong support levels before ending the day just above the day’s low of 1.2213 (NY close 1.2218). While further GBP weakness is not ruled out, severely over-extended conditions could ‘limit’ any loss to 1.2170. The next support is further down at 1.2110, for today, this level is unlikely to come into the picture. On the upside, resistance is at 1.2260 followed by 1.2295″.

Next 1-3 weeks: “While we expected GBP to trade with a ‘downside bias’ yesterday (29 Jul, spot at 1.2380), we indicated we have “doubts about the sustainability of any decline”. The manner of which GBP subsequently crashed through our support levels at 1.2340 and 1.2300 has put our doubts to rest. From here, instead of trading with a ‘downside bias’, GBP is deemed to have move into a ‘negative phase’ and could weaken further to the next support at 1.2110. Only a move above the 1.2335 ‘key resistance’ (level was a strong resistance at 1.2460 yesterday) would indicate that the current weakness in GBP has stabilized”.