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Cable could gradually return to the 1.3100 region in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we held the view that GBP ‘could dip towards 1.3200 first before a more sustained recovery can be expected’. While GBP weakened as expected, it sliced through 1.3200 and plummeted to an overnight low of 1.3139. The rapid decline appears to be overdone but with no sign of stabilization just yet, there is room for GBP to weaken further. That said, the chance for a break of the major support at 1.3100 is not high (the overnight low is acting a minor support). Resistance is at 1.3195 but the stronger level is at 1.3230.”

Next 1-3 weeks: “We have held the same view since last Friday (04 Sep, spot at 1.3260) wherein the outlook for GBP is mixed and it is expected to trade between 1.3150 and 1.3400 for a while. Yesterday (07 Sep), GBP dipped below the bottom of the expected range (low of 1.3139) before recovering. Downward momentum is showing tentative signs of improving but only a daily closing below 1.3100 would indicate GBP is ready for a more sustained decline. Meanwhile, GBP is likely to trade with a downward bias towards 1.3100. On the upside, a move above 1.3280 (‘strong resistance’ level) would indicate that the current downward pressure has eased.”