FX Strategists at UOB Group remain bearish on Cable and see the likeliness of a drop to the 1.1980 region in the near term.
Key Quotes
24-hour view: “Our expectations of consolidation (1.2120-1.2250) yesterday were incorrect. GBP’s downside resumed, dropping to fresh lows of 1.2080. However, the subsequent rebound to 1.2127 meant that downside momentum was not strong either. Today, GBP may continue to drift a bit lower, albeit in a 1.2020 – 1.2160 range”.
Next 1-3 weeks: “While we held the view yesterday (30 Jul, spot at 1.2225) that GBP has moved into a ‘negative phase’ and that it “could trade to 1.2110″, the subsequent rapid pace of decline was not exactly expected (GBP plunged to an overnight low of 1.2120). The downward acceleration over the past couple of days could be attributed to the lack of significant support levels. From here, if GBP were to crack 1.2110, it could lead to further steep decline as the next support is more than 100 pips lower at 1.1985. That said, 1.1985 is just a minor low in Jan 2017 (on the weekly chart) and it is left to be seen how much support it can offer (if GBP were to move to this level). Below this level, the more significant support would be the Oct 2016 ‘flash crash’ low of 1.1491. All in, despite being oversold, the current weakness in GBP is not showing sign of stabilizing just yet. Only a break of the 1.2295 ‘key resistance’ (level was at 1.2335 yesterday) would suggest that the decline in GBP is ready to take a breather”.
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