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In opinion of FX Strategists at UOB Group, Cable could now head towards the 1.3760 zone in the next weeks.

Key Quotes

24-hour view: “While we noted yesterday that ‘downward momentum is waning and further sustained weakness is unlikely’, we did not anticipate the sudden surge in GBP that sent it soaring by +1.15% (1.3670). Upward momentum remains strong and further GBP strength is likely even though overbought conditions suggest that it may not be able to maintain a foothold above last week’s peak at 1.3703 (next resistance is at 1.3730). On the downside, a break of 1.3600 would indicate the current upward pressure has eased (minor support is at 1.3630).”

Next 1-3 weeks: “Two days ago (11 Jan, spot at 1.3525), we highlighted that ‘a daily closing below 1.3460 could lead to GBP moving lower to 1.3400’. GBP subsequently dipped to 1.3451 before staging a surprisingly sharp rise yesterday to a high of 1.3670. The prospect for GBP weakness has dissipated and while the risk has shifted to the upside, any advance is expected to face solid resistance at 1.3760. Overall, GBP is expected to trade with an upward bias with 1.3550 acting as ‘strong support’ level.”