In opinion of FX Strategists at UOB Group, cable remains poised for further weakness and faces solid support levels at 1.3050 and 1.3000 in the next weeks.
Key Quotes
24-hour view: “We highlighted yesterday that GBP ‘could breach 1.3100 but may not be able to maintain a foothold below this major support’. Our view was not wrong as GBP subsequently dropped to 1.3083 during early London hours before rebounding to trade mostly sideways for the rest of the sessions. While the bias still appears to be on the downside, any decline is unlikely to threaten the major support at 1.3050. Resistance is at 1.3150 followed by 1.3180.”
Next 1-3 weeks: “Yesterday (08 Mar, spot at 1.3110), we highlighted that downward momentum remains strong and a breach of 1.3100 would shift the focus to 1.3050 followed by 1.3000. GBP subsequently dropped to 1.3083 before closing little changed at 1.3102 (-0.03%). There is no change in our view for now even though oversold shorter-term conditions suggest a slower pace of decline. Overall, the downside risk is intact as long as GBP does not move above 1.3250 (‘strong resistance’ level was at 1.3280 yesterday). A break of the ‘strong resistance’ would indicate that the GBP weakness that started more than a week ago (see annotations in the chart below) has run its course.”