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Cable’s recent move to the 1.3200 area could be deemed as a near-term top, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our view that from yesterday that ‘1.3200 is likely a short-term top’ was not wrong, we held the view that ‘any decline is unlikely to move below 1.3000’. However, GBP staged a precipitous drop as it plunged to a low 1.2884 before closing at 1.2902 (the -1.71% 1-day decline is the largest since Sep 2018). The rapid drop is running ahead of itself and while GBP could dip towards 1.2840 from here, it is unlikely to challenge the next support at 1.2800. Resistance is at 1.2950 followed by 1.2990.”

Next 1-3 weeks: “While we highlighted yesterday (10 Mar, spot at 1.3080) that the ‘prospect for a sustained advance above 1.3200 is not high’, we held the view that the ‘severely overbought short-term conditions could lead to a couple of days of consolidation’. Instead of consolidating, GBP plunged to an overnight low of 1.2884. The break of our strong support at 1.2960 indicates that 1.3200 is likely a short-term top. From here, the rapid pull-back has scope to extend lower but at this stage, the late February’s low of 1.2726 is likely out of reach. All in, GBP is expected to stay under pressure from here unless it can move and stay above 1.3080 within these few days.”

 

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