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Cable’s upside bias could extend further north and test the 1.35 level and beyond, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected GBP to trade sideways yesterday but it dropped sharply to an overnight low of 1.3284. Despite the quick rebound from the low, the underlying tone still appears weak. From here, GBP could dip towards the 1.3260 support first before a stronger recovery can be expected. For today, a sustained decline below 1.3260 appears unlikely. Resistance is at 1.3360 followed by 1.3390.”

Next 1-3 weeks: “Two days ago on 31 Aug (spot at 1.3350), we indicated that GBP ‘could strengthen towards 1.3450, albeit likely at a slower pace’. While the 1.3450 level was exceeded as GBP soared to a high of 1.3481 yesterday (01 Sep), the advance was short-lived as GBP dropped back down to close slightly higher at 1.3386 (+0.12%). Upward momentum has been dented somewhat but GBP could still move towards the 2019 peak at 1.3516. Meanwhile, overbought short-term conditions could lead to a few days of consolidation and only a break of 1.3260 (‘strong support’ level previously at 1.3220) would indicate that a short-term top is in place.”

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