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Cable is seen extending the downside on a breach of the 1.2795 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We noted yesterday ‘the combination of waning momentum and oversold conditions suggest that the recent weakness in GBP is stabilizing’. However, we were of the view that there is scope for GBP to ‘test the 1.2750 support first before a more sustained recovery can be expected’. GBP did not test 1.2750 as it rebounded to an overnight high of 1.2918 before easing off to close at 1.2843 (+0.38%). Momentum indicators are neutral and the current movement is viewed as part of a consolidation phase. For today, GBP is expected to trade between 1.2795 and 1.2920.”

Next 1-3 weeks: “We have expected GBP to weaken since early last week. In our latest narrative from last Friday (11 Sep, spot at 1.2795), we indicated that the ‘outlook for GBP remains weak and the next level to focus on is at 1.2680’. GBP subsequently dropped to 1.2763 but has since has rebounded a fair bit. Downward momentum is waning and from here, a breach of 1.2950 would indicate that GBP may have found an interim bottom at 1.2763. Overall, GBP has to close below 1.2795 within these few days or the prospect for further weakness would diminish quickly.”