Cable’s rebound could extend further although it is likely to remain sidelined in the near term, suggested FX Strategists at UOB Group.
24-hour view: “The strong advance in GBP yesterday came as a surprise as it cracked a couple of major strong resistance levels with ease and soared to a high of 1.2558 during late NY session. While the rapid rise appears to running ahead of itself, there is scope for GBP to edge above last week’s 1.2580 peak but the next resistance at 1.2615 is likely out of reach. Support is at 1.2495 but the stronger level is at 1.2460”.
Next 1-3 weeks: “The manner of which GBP recouped the sharp decline from earlier this morning came as a surprise. GBP soared by +0.93% (largest 1- day gain in 2-1/2 months) and easily took out our 1.2490 ‘key resistance’. The break of 1.2490 nullified our view from Tuesday (17 Jul, spot at 1.2430) wherein we expected GBP to “trade towards 1.2340”. While the sharp bounce yesterday suggests Tuesdays (17 Jul) low of 1.2382 could be a short-term bottom, it is too early to expect a sustained rebound. From here, GBP is likely to trade sideways, even though the immediate bias is for it to probe the top of the expected 1.2430/1.2640 range first”.