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In opinion of FX Strategists at UOB Group, Cable risks a deeper pullback to 1.1985 in the next weeks.

Key Quotes

24-hour view: “Yesterday, we held the view that GBP “could probe 1.2125 but the next support at 1.2100 is unlikely to come into the picture”. However, Brexit headlines sent GBP crashing through 1.2100 as it plunged to an overnight low of 1.2036. The rapid and sharp drop appears to be running ahead of itself and while GBP could weaken from here, a sustained decline below the 1.2015 year-to-date low appears unlikely, at least for today (there is another strong support at 1.2000). All in, GBP is expected to remain under pressure unless it can move back above 1.2130 (minor resistance is at 1.2100)”.

Next 1-3 weeks: “While we indicated yesterday (02 Sep, spot at 1.2160) that “looking forward, only a NY close below 1.2100 would suggest that GBP is ready to extend its weakness to 1.2050, possibly retesting the August’s low of 1.2015″, we did not expect it to happen so quickly. GBP crashed below 1.2100 and plunged to 1.2036 before ending the day on a weak note at 1.2063 (-0.84%). From here, instead of ‘retesting’ 1.2015, GBP could extend its decline to 1.1985. That said, the rapid drop appears to be running ahead of itself and 1.1985 may not come into the picture so soon. Overall, after yesterday’s price action, the risk for GBP is clearly on the downside and only a move above the 1.2170 ‘key resistance’ would indicate that the current weakness has stabilized. Shorter-term, 1.2130 is already a strong level”.