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Cable could have carved an interim low after testing the 1.2660 zone earlier in the week, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that “a retest of the low near 1.2660 would not be surprising but this should be followed by a more sustained recovery”. GBP subsequently dipped to a low of 1.2686 before rebounding to reach a high of 1.2754. Downward pressure has eased and from here, there is room for GBP to edge higher but any up-move is viewed as part of a 1.2690/1.2765 consolidation range”.

Next 1-3 weeks: “We have been bearish GBP since late last week and highlighted on Monday (13 Aug, spot at 1.2760) that “the revised ‘target’ of 1.2675 appears to be within reach sometimes this week”. In line with expectation, the ‘target’ was exceeded in overnight trading as GBP dropped to a low of 1.2662. While the outlook is still clearly bearish, GBP has moved deeper into oversold territory and the risk of an interim low has increased. However, only a break of 1.2840 (no change in the ‘stop-loss’ level) would indicate that a low is in place. Shorter-term, a move above 1.2780 would further increase the risk of an interim low. To put it another way,

GBP has to ‘punch’ and hold below the near-term support at 1.2645 within these 1 to 2 days or the next ‘target’ at 1.2590 could be out of reach this time round”.