Following the recent price action, there is scope for Cable to visit the 1.2580 region in the near term, suggested FX Strategists at UOB Group.
24-hour view: “We warned last Friday that “the quiet sideway trading over the past few days appears to be close to ending” and added, a “clear break of 1.2380 could lead to a rapid rise to 1.2420”. While our expectation for an end to the quiet trading phase was not wrong, we underestimated the subsequent ‘explosive’ price action as instead of a rising rapidly to 1.2420, GBP blew past the level and rocketed to a high of 1.2506. The outsized rally is running ahead of itself and further sustained advance is not expected. GBP is more likely to consolidate its gains and trade sideways to slightly higher from here, expected to be within a 1.2450/1.2530 range”.
Next 1-3 weeks: “While we indicated last Friday (13 Sep, spot at 1.2330) that “we are not ruling out further GBP strength” and “GBP could be ready to move out the ‘range trading phase’ over the past few days”, the manner by which GBP blew past several strong resistance levels with ease and rocketed to a high of 1.2506 came as a surprise (GBP gained +1.37% last Friday, the largest 1-day advance since March this year). The recovery that started more than a week ago (05 Sep, spot at 1.2245) has moved into a new phase and we see room for GBP to test 1.2580 from here even though it is unlikely able to maintain the pace of its current advance. On the downside, only a break of 1.2350 (strong support level was at 1.2235 last Friday) would indicate that GBP strength has run its course”.