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In light of the recent price action, Cable could extend the upside momentum to the 1.3340 zone in the next weeks.

Key Quotes

24-hour view: “We expected GBP to ‘edge higher’ yesterday and were of the view that ‘the prospect for a break of the solid resistance at 1.3160 is not high’. While we got the direction right, we did not anticipate the sudden surge that sent GBP rocketing to a fresh 2020 high of 1.3276 (closed at 1.3237, +1.00%). While further GBP strength would not be surprising, severely overbought conditions could counteract the strong momentum and ‘limit’ gains to 1.3300. For today, the next resistance at 1.3340 is likely out of reach. Support is at 1.3200 followed by 1.3165.”

Next 1-3 weeks: “We expected GBP to trade sideways within a 1.2950/1.3160 range since last Tuesday (11 Aug, spot at 1.3075). After about a week, the sideway-trading phase ended abruptly as GBP cracked several solid resistance levels with ease and vaulted to a high of 1.3276 before closing higher by +1.00% (1.3237), its biggest 1-day gain in 2-1/2 months. The break of key resistance levels coupled with the sudden burst in upward momentum suggests GBP could continue to advance towards 1.3340, even as high of 1.3400. On the downside, the ‘strong support’ level at 1.3120 is expected to be strong enough to hold, at least for these few days. Only a breach of the ‘strong support’ level would indicate the current strong upward pressure has eased.”