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According to FX Strategists at UOB Group, Cable could have carved an interim low in light of the recent price action.

Key Quotes

24-hour view: “In line with expectation, GBP dipped below the major support indicated at 1.2675 yesterday but did not have enough momentum to challenge the next support at 1.2645. However, the tepid rebound from an overnight low of 1.2662 suggests the immediate bias is still on the downside but we continue to see low chance for a clear break of 1.2645. From here, a retest of the low near 1.2660 would not be surprising but this should be followed by a more sustained recovery”.

Next 1-3 weeks: “We have been bearish GBP since late last week and highlighted on Monday (13 Aug, spot at 1.2760) that “the revised ‘target’ of 1.2675 appears to be within reach sometimes this week”. In line with expectation, the ‘target’ was exceeded in overnight trading as GBP dropped to a low of 1.2662. While the outlook is still clearly bearish, GBP has moved deeper into oversold territory and the risk of an interim low has increased. However, only a break of 1.2840 (no change in the ‘stop-loss’ level) would indicate that a low is in place. Shorter-term, a move above 1.2780 would further increase the risk of an interim low. To put it another way, GBP has to ‘punch’ and hold below the near-term support at 1.2645 within these 1 to 2 days or the next ‘target’ at 1.2590 could be out of reach this time round.