GBP/USD neutral, could still test 1.2900 – UOB

In view of FX Strategists at UOB Group, the near term outlook for Cable remains neutral although it could retreat to the 1.2900 area.

Key Quotes

24-hour view: “We highlighted yesterday “a dip below the strong 1.2940 support is not ruled out but a sustained decline below this level seems highly unlikely”. GBP held above 1.2940 for most of yesterday before dropping quickly to a low of 1.2925 during late NY hours. Despite the break of the strong support, downward momentum has not improved all that much. That said, the bias is clearly on the downside but any weakness could be limited to a test of the 1.2900 support (next support is at 1.2860). Resistance is at 1.2975 followed by 1.3000. Yesterday’s high of 1.3023 is likely ‘safe’ for now.

Next 1-3 weeks: “We highlighted earlier yesterday (02 Oct, spot at 1.3040) that “while downward momentum has not improved all that much, the near-term bias is on the downside even though any GBP weakness may struggle to break 1.2940″. That said, we do not expect 1.2940 to be tested within 24 hours as GBP hit a low of 1.2941 during NY hours before rebounding quickly. Despite the recovery, the current weakness has yet to show sign of stabilization and we expect GBP to remain under pressure in the coming days. From here, a clear break of 1.2940 would suggest GBP is ready to tackle the next support at 1.2900. Depending on price action in the next few days, a probe of the next support at 1.2860 would not exactly be surprising. On the upside, only a break of the ‘key resistance’ at 1.3080 (previously at 1.3170) would indicate that GBP has found a short-term bottom”.