Cable remains near term neutral and could test the 1.2900 area in the next weeks, suggested FX Strategists at UOB Group.
Key Quotes
24-hour view: “Expectation for sideway trading yesterday was wrong as GBP dropped sharply and tested the major 1.2940 support. Downward momentum has waned with the subsequent quick rebound from a low of 1.2941. That said, a dip below 1.2940 is not ruled out but a sustained decline below this level seems highly unlikely (next support is at 1.2900). Resistance is at 1.3020 but the stronger level is closer to 1.3050″.
Next 1-3 weeks: “We highlighted earlier yesterday (02 Oct, spot at 1.3040) that “while downward momentum has not improved all that much, the near-term bias is on the downside even though any GBP weakness may struggle to break 1.2940″. That said, we do not expect 1.2940 to be tested within 24 hours as GBP hit a low of 1.2941 during NY hours before rebounding quickly. Despite the recovery, the current weakness has yet to show sign of stabilization and we expect GBP to remain under pressure in the coming days. From here, a clear break of 1.2940 would suggest GBP is ready to tackle the next support at 1.2900. Depending on price action in the next few days, a probe of the next support at 1.2860 would not exactly be surprising. On the upside, only a break of the ‘key resistance’ at 1.3080 (previously at 1.3170) would indicate that GBP has found a short-term bottom”.
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