In light of the recent rebound, Cable is now seeing entering into a consolidative phase, suggested FX Strategists at UOB Group.
Key Quotes
24-hour view: “In an abrupt and sharp move, GBP cracked the major 1.2195 resistance and rocketed to an overnight high of 1.2273. The rally appears to be running too fast, too soon and while GBP could move above the overnight high, a sustained rise above the next resistance at 1.2305 seems unlikely. All in, GBP is likely to stay underpinned unless it moves below 1.2195 (minor support is at 1.2225)”.
Next 1-3 weeks: “We have warned since Monday (19 Aug, spot at 1.2155) that “the odds for further GBP weakness have diminished”. We added, a break of the 1.2195 ‘key resistance’ would indicate that the ‘negative phase’ that started in late July has ended and GBP would then likely to trade sideways to slightly higher. After ‘vacillating’ for a few days, GBP made up its mind and took out the 1.2195 ‘key resistance’. That said, the subsequent strong advance of +1.10% (largest 1-day gain in about 4 months) was not exactly expected. For now, we view the up-move as part of a ‘consolidation phase’ even though the rapid and robust rise suggests GBP would likely probe the top of the expected 1.2150/1.2380 range first in the coming days/weeks”.
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