FX Strategists at UOB Group noted the bearish note around Cable and signalled the next support of relevance at 1.2230.
24-hour view: “We expected to GBP to ‘weaken further’ yesterday but were of the view last month’s low at 1.2726 ‘is likely out of reach’. However, GBP cracked 1.2726 with ease and nose-dived to a low of 1.2490. The combination of impulsive downward momentum and break of strong support levels suggest further GBP weakness towards 1.2450 (next support is at 1.2370). On the upside, GBP is not expected to move back above 1.2680 (minor resistance is at 1.2600).”
Next 1-3 weeks: “We indicated on Wednesday (11 Mar, spot at 1.2905) that the Monday’s peak of 1.3200 ‘is a short-term top’. While we expected GBP to weaken, we did anticipate the sudden and sharp decline of -1.98% yesterday (12 Mar). From what we can see, this is the largest 1-day drop since Brexit referendum in June 2016. The vastly improved momentum suggests further GBP weakness. The next support of note is at 1.2230 (see chart in 1-3 months view below). That said, it is left to be seen if GBP can move to 1.2230 in one breath. On the upside, GBP has to move and stay above 1.2820 (‘strong resistance’ level was at 1.2980 yesterday) in order to indicate the current weakness has stabilized.”