Cable risks a corrective downside to the mid-1.3800s in the next week, noted FX Strategists at UOB Group.
24-hour view: “We highlighted yesterday that ‘upward pressure has waned and GBP is likely to trade sideways between 1.4080 and 1.4220’. We did not anticipate the sudden and sharp sell-off in GBP to an overnight low of 1.4001 (GBP extended its decline after Asian opening). Further weakness is not ruled out but oversold conditions suggest the support at 1.3900 is unlikely to come into the picture (minor support is at 1.3935). Resistance is at 1.4030 followed by 1.4080.”
Next 1-3 weeks: “After GBP breached 1.4150 two days ago (24 Feb, spot at 1.4170), we highlighted that ‘the focus has shifted to 1.4300’. We did not anticipate the overnight sharp sell-off that easily cracked our ‘strong support’ level of 1.4020. The break of the ‘strong support’ indicates that the positive phase in GBP that started about 2-1/2 weeks ago has come to an abrupt end. The current movement is viewed as the early stages of a corrective pullback. At this stage, any pullback is likely limited to a test of 1.3850. On the upside, 1.4110 is acting as a ‘strong resistance’ level.”