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In opinion of FX Strategists at UOB Group, Cable has moved into a negative phase and could extend the drop to the 1.3700 neighbourhood in the next weeks.

Key Quotes

24-hour view: “Our expectation for GBP to ‘test 1.3895 first before easing’ was incorrect as it staged a surprisingly sharp drop to an overnight low of 1.3740 (high has been 1.3867). While oversold, the swift and sharp decline in GBP has room to move to 1.3700, with decent odds for extension to 1.3660. On the upside, 1.3810 is likely strong enough to cap any intraday rebound (minor resistance is at 1.3775).”

Next 1-3 weeks: “Yesterday (Mar 23, spot at 1.3840), we detected that ‘downward momentum is beginning to improve’ and we were of the view that GBP ‘has to close below 1.3780 before a sustained decline can be expected’. We added, ‘looking ahead, the next support level of note below 1.3780 is at 1.3700’. While our view was not wrong, we did not quite anticipate the swift and sharp drop to an overnight low of 1.3740. GBP is deemed to have moved into a weak phase. The next support below 1.3700 is at 1.3660 followed by 1.3600. On the upside, the ‘strong resistance’ level at 1.3850 is expected to cap any recovery within these few days. On a shorter-term note, 1.3810 is already quite a solid resistance level.”