Cable remains under pressure and risks extra retracements in the near-term, according to FX Strategists at UOB Group.
24-hour view: “The sudden and sharp plunge in GBP last Friday came as a surprise as it cracked several strong support levels with ease and hit a 4- 1/2 -month low of 1.2726 before rebounding. While further GBP weakness appears likely in the days ahead, the rapid short-term drop is running ahead of itself. From here, GBP is expected to consolidate and trade between 1.2735 and 1.2855.”
Next 1-3 weeks: “While we indicated last Friday that a ‘NY close below 1.2800 would suggest GBP is ready to embark of a sustained decline’, we were of the view ‘the prospect for such a scenario is low for now’. However, GBP sliced through 1.2820 and plunged to a 4-1/2 -month low of 1.2726 before snapping back up to end the day at 1.2821 (-0.48%). The break of 1.2820 has exposed the downside in GBP even though 1.2700 is a strong support and may not come into the picture so soon. To look at it another way, GBP could consolidate for a couple of days first before making a run for 1.2700. On the upside, only a move above 1.2900 (‘strong resistance’ level) would indicate that GBP is not ready to move lower just yet.”