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In opinion of FX Strategists at UOB Group, Cable needs to close above 1.2800 to allow for extra gains in the near-term.

Key Quotes

24-hour view: “Our view for GBP yesterday was that unless it ‘can break 1.2760 and stay above this level, the risk of a deep pullback would increase quickly’. GBP rose briefly to 1.2812 before dropping back down to end the day at 1.2747 (+0.16%). Upward momentum has deteriorated rapidly and for today, GBP is not expected to move above the 1.2812 high (1.2780 is already quite a strong resistance). However, it is too early to expect a sustained decline. From here, GBP is likely to drift lower to 1.2680 (minor support is at 1.2710).”

Next 1-3 weeks: “We highlighted yesterday that ‘unless GBP moves and stays above 1.2760 by end of today, prospect for further strength to 1.2800 would diminish quickly’. While GBP subsequently popped above 1.2800 (overnight high of 1.2812), it retreated quickly to end the day at 1.2747 (+0.16%). Momentum has deteriorated further and the risk for the positive phase that started early last week to come to an end has increased. Unless GBP closes above 1.2800 within these 1 to 2 days, a break of 1.2630 (‘strong support’ previously at 1.2610) would not be surprising and would indicate that positive phase has run its course. Looking ahead, if GBP manages to close above 1.2800, there is another major resistance at 1.2860.”

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