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Cable’s downside could extend to the 1.2680 region in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we held the view that the rapid bounce in GBP ‘has room to extend further but any advance is viewed as part of a higher trading range of 1.2950/1.3055’. GBP subsequently rose to a high of 1.3035 before diving to an overnight low of 1.2773. While the outsized and sped up crash appears overdone, there is no sign of stabilization just yet. Further weakness is not ruled even though the next major support at 1.2680 is likely out of reach for now (minor support is at 1.2730). On the upside, resistance is at 1.2840 followed by 1.2890.”

Next 1-3 weeks: “We expected GBP to weaken since earlier this week. In our latest narrative from Wednesday (09 Sep, spot at 1.2965), we highlighted that ‘while the rapid drop appears to be overdone, strong downward momentum suggests GBP could weaken further towards the critical support at 1.2855’. We added, ‘a clear break of this level could potentially lead to further weakness towards 1.2680’. The 1.2855 level did not offer any ‘support’ as GBP crashed to an overnight low of 1.2773. In other words, the outlook for GBP remains weak and the next level to focus on is at 1.2680. Looking forward, the next support is at 1.2610. On the upside, the ‘strong resistance’ level has moved lower to 1.3050 from 1.3120 previously. On a shorter-term note, 1.2950 is already quite a solid level.”