In opinion of FX Strategists at UOB Group, Cable could slip back to the mid-1.2200s in the next weeks.
Key Quotes
24-hour view: “Our view for GBP yesterday was “the decline in GBP has room to extend lower but 1.2310 is expected to offer solid support”. The subsequent weakness exceeded our expectation as GBP dropped to 1.2303 before recovering. The decline in GBP appears to have stabilized somewhat but it is too early to expect a sustained rebound. GBP is more likely to consolidate its loss and trade sideways to slightly lower. Expected range for today, 1.2290/1.2360″.
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 pullback 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”.
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