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The correction lower in Cable could extend to the mid-1.2200s in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Against our expectation for a stronger recovery, GBP plunged to an overnight low of 1.2349 before ending the day on a weak note at 1.2350 (-1.17%). While oversold, the decline has room to extend further even though the strong 1.2310 support may not yield so easily (next support is at 1.2285). Resistance is at 1.2390 but GBP is expected to remain under pressure unless it can move back above 1.2420″.

Next 1-3 weeks: “While our view from two days ago (24 Sep, spot at 1.2435) that GBP has made a “short-term top” was correct, we expected GBP to trade sideways to “slightly lower”. However, GBP plummeted yesterday (25 Sep) and already tested the bottom of our expected 1.2350/1.2550 sideway trading range (overnight low 1.2349). The price action suggests 1.2582 could be a more significant top than previously expected. In other words, instead of “slightly lower”, the pull-back in GBP could extend lower to the next support at 1.2250. Resistance is at 1.2420 but only a move above 1.2450 (‘strong resistance’) would indicate that the current downward pressure has eased”.