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Cable remains under pressure and it has now shifted its focus on a potential break below 1.2230, which should lead to a visit of the 1.2060 level, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our expectation for GBP to ‘consolidate and trade within a broad 1.2250/1.2550 range’ was incorrect as it extended its decline from the past several days and hit a low of 1.2203 before recovering. The overall picture still suggests a lower GBP from here but oversold conditions suggests a slower pace of decline and any dip below 1.2200 may be limited to a test of 1.2160. On the upside, only a move above 1.2370 would indicate the current weakness has stabilized (minor resistance is at 1.2320).”

Next 1-3 weeks: “We called for ‘a short-term top’ last Wednesday (11 Mar, spot at 1.2905) and as GBP dropped, we highlighted on Friday (13 Mar, spot at 1.2530) that ‘GBP is still weak’ but added, ‘it is left to be seen if it can move to the next support of note at 1.2230 in one breath’. GBP subsequently took a huge breath and dived to a low of 1.2250 before closing at 1.2290 on Friday, down by -2.16% (the largest 1-day drop since June 2016). For the week, GBP lost a staggering -5.80%, the largest 1-week drop since 2009. From here, a break of 1.2230 would expose the next support at 1.2060 followed by the 2019 low near 1.1960. On the upside, the ‘strong resistance’ has moved lower to 1.2750 from Friday’s level of 1.2820.”