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Cable faces further losses on a breakdown of the 1.2970 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for GBP ‘to consolidate and trade between 1.3020 and 1.3125’ was incorrect as it plummeted to 1.2982 before rebounding sharply to end the day little changed at 1.3071 (-0.05%). The rapid rebound appears to have room to extend higher but for today, a break of 1.3125 appears unlikely (next resistance is at 1.3170). Support is at 1.3040 followed by 1.3010. The 1.2982 low is likely ‘safe’ for today.”

Next 1-3 weeks: “While we have expected GBP to strengthen since 21 Jul (spot at 1.2670); in our latest narrative from last Thursday (30 Jul, spot at 1.2980), we held the view that GBP ‘could continue to advance but any potential gain is likely to be relatively modest. Next resistance is at 1.3080’. However, GBP blast past 1.3080 and surged to a high of 1.3170 last Friday. The subsequent sharp and rapid pull-back has dented the upward momentum considerably and this coupled with overbought conditions suggest the rally in GBP could be coming to an end soon. From here, unless GBP moves and stays above 1.3170 within these few days, a breach of 1.2970 (‘strong support’ level previously at 1.2850) would indicate that the current positive phase in GBP has run its course.”