Cable risks further downside to the 1.2060 area if 1.2230 is breached, suggested FX Strategists at UOB Group.
24-hour view: “We highlighted last Friday that ‘strong and impulsive momentum suggests further GBP weakness to 1.2450’. The subsequent weakness exceeded our expectation by a huge margin as GBP crashed to 1.2250 before posting its largest 1-day drop since June 2016 (closed at 1.2290, -2.16%). The strong downward momentum has eased somewhat as GBP bounced upon opening this morning. For today, GBP is likely to consolidate and trade within a broad range of 1.2250/1.2550.”
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.”