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Cable needs to keep busines above 1.3725 to allow for a move to the 1.3800 level in the next weeks, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for GBP to ‘break 1.3760’ was wrong as it dropped sharply to 1.3636 before rebounding to close at 1.3682 (-0.39%). The rapid decline appears to be running ahead of itself and further weakness appears unlikely. GBP is more likely to consolidate and trade sideways between 1.3640 and 1.3725.”

Next 1-3 weeks: “Last Friday (22 Jan, spot at 1.3735), we noted that upward momentum has improved and we held the view that GBP ‘is likely to strengthen towards 1.3800’. The subsequent swift drop to a low of 1.3638 came as a surprise. While our ‘strong support’ level at 1.3630 is still intact, upward momentum has been dented. In order to rejuvenate the flagging momentum, GBP has to move and stay above 1.3725 within these 1 to 2 days or odds for a move to 1.3800 would diminish quickly. Conversely, a break of 1.3630 would indicate GBP could trade sideways for a while.”