In opinion of FX Strategists at UOB Group, further downside in Cable looks likely although a break below 1.3900 appears off the table for the time being.
Key Quotes
24-hour view: “We expected GBP to weaken yesterday but we were of the view that ‘1.4005 is unlikely to come into the picture’. The subsequent weakness exceeded our expectations as GBP plummeted to 1.3983. Not surprisingly, the sharp and rapid drop is oversold but strong downward momentum suggests that GBP could weaken further to 1.3940. The major support at 1.3900 is not expected to come into the picture. Resistance is at 1.4030 followed by 1.4060.”
Next 1-3 weeks: “While we noted yesterday that ‘risk has shifted to the downside’, we were of the view that ‘the major support at 1.4005 may not come into the picture so soon’. However, GBP cracked 1.4005 during NY session as it plummeted to 1.3983. In view of the rapid increase in momentum, GBP is expected to weaken further even though oversold conditions suggest that the prospect for a clear break of the major long-term support at 1.3900 is not high for now. Overall, the downside risk in GBP remains intact unless it can move above 1.4100 (‘strong resistance’ level was at 1.4150 yesterday).”
