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In opinion of FX Strategists at UOB Group, Cable’s outlook remains weak and could drop to the 1.2680 region in the next weeks.

Key Quotes

24-hour view: “Our expectation for ‘further GBP weakness’ did not materialize as it traded in a relatively narrow range (after several consecutive days of sharp decline) between 1.2763 and 1.2866 before settling slightly lower at 1.2794 (-0.09%). The combination of waning momentum and oversold conditions suggest that the recent weakness in GBP is stabilizing. That said, there is scope for GBP to test the 1.2750 support first before a more sustained recovery can be expected. Resistance is at 1.2850 but the stronger level is at 1.2890.”

Next 1-3 weeks: “We expected GBP to weaken since earlier this week. In our latest narrative from Wednesday (09 Sep, spot at 1.2965), we highlighted that ‘while the rapid drop appears to be overdone, strong downward momentum suggests GBP could weaken further towards the critical support at 1.2855’. We added, ‘a clear break of this level could potentially lead to further weakness towards 1.2680’. The 1.2855 level did not offer any ‘support’ as GBP crashed to an overnight low of 1.2773. In other words, the outlook for GBP remains weak and the next level to focus on is at 1.2680. Looking forward, the next support is at 1.2610. On the upside, the ‘strong resistance’ level has moved lower to 1.3050 from 1.3120 previously. On a shorter-term note, 1.2950 is already quite a solid level.”