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Cable remains under downside pressure and a test of 1.2300 should not be ruled out in the near term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “While we expected GBP to weaken last Friday, the extent of the decline that took out the mid-July low of 1.2382 came as a surprise (low of 1.2377). While oversold, the decline has scope to test 1.2340 before stabilizing. Resistance is at 1.2405 followed by 1.2430. Last Friday’s 1.2459 peak is not expected to come into the picture”.

Next 1-3 weeks: “The week-long ‘sideway-trading phase’ that started on (19 Jul, spot at 1.2540) has ended as GBP not only cracked the bottom of our expected 1.2400/1.2580 range last Friday (26 Jul) but also registered a fresh year-to-date (and two-year) low of 1.2377. While further GBP weakness would not be surprising, we have doubts about the sustainability of any decline (would prefer to see GBP spend a longer time unwinding from oversold conditions). For now, we expect GBP to trade with a ‘downside bias’ to 1.2340. A dip below this level is not ruled out but note that there is another relatively strong support at 1.2300. On the upside, GBP has to reclaim 1.2460 in order to indicate that the current weakness has stabilized”.