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Cable is now expected to extend the correction lower to the 1.2730 region in the next weeks, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “Yesterday, we detected the ‘weakened underlying tone’ and expected GBP ‘to drift lower to 1.2875’. However, GBP plunged to a low of 1.2776 before recovering to close on a weak note at 1.2816 (-0.77%). The rapid decline appears to be overdone and while GBP could retest the 11 Sep low of 1.2763, a sustained decline below this level is not expected (next support is at 1.2730). Resistance is at 1.2860 but only a move back above 1.2890 would indicate the current downward pressure has eased.”

Next 1-3 weeks: “We have held the same view since last Thursday (17 Sep, spot at 1.2950) wherein ‘1.2763 is likely an interim bottom’ and GBP ‘could consolidate between 1.2800 and 1.3100 for a period of time before attempting to move below 1.2763’. After the strong decline yesterday (11 Sep), a break of 1.2763 would not be surprising but at this stage, is appears too soon to expect a move towards the next major support at 1.2660. All in, we expect GBP to trade with a downward bias towards 1.2730 but GBP has to close below this level before further weakness can be expected. On the upside, a break of 1.2930 (‘strong resistance’ level) would indicate that GBP needs more time before moving lower in a more sustained manner.”