In opinion of FX Strategists at UOB Group, a close above 1.2195 would indicate that the negative phase has ended.
Key Quotes
24-hour view: “Expectation for ‘sideway trading’ yesterday was incorrect as GBP had a relatively active session as it reversed an initial dip to 1.2065 and surged to an overnight high of 1.2180. While the rapid rise appears to be running ahead of itself, there is room for GBP to extend its gain. That said, any advance is expected to face solid resistance at 1.2195 (next resistance is at 1.2220). Support is at 1.2135 followed by 1.2100. The 1.2065 low is unlikely to come into the picture for today”.
Next 1-3 weeks: “We highlighted yesterday (20 Aug, spot at 1.2130) that “shorter-term indicators continue to suggest that the odds for further GBP weakness have diminished” and added, “in order to revive the current flagging downward momentum, GBP has to move and stay below 1.2070 soon”. GBP subsequently dipped below 1.2070 (low of 1.2065) before soaring to 1.2180. From here, a break of 1.2195 (no change in ‘key resistance’ level) would suggest the ‘negative phase’ that started in late July has ended. While a break of 1.2195 would indicate that last week’s 1.2015 low is a short-term bottom, it is premature to expect a major reversal. To put it another way, a break of 1.2195 would indicate that GBP has moved into a consolidation phase and it is likely to trade sideways to slightly higher for a couple of weeks”.
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