GBP/USD: Downside pressure remains unchanged – UOB
FX Strategists at UOB Group noted that the selling pressure around Cable still persists and could prompt a drop to the 1.2950 area in the near-term.
24-hour view: “Our view for GBP yesterday was that ‘further decline is likely but oversold conditions suggest 1.2955 could be out of reach’. GBP declined as expected but rebounded quickly after touching a low of 1.2962. The combination of waning momentum and oversold conditions suggest GBP has likely moved into a correction phase. From here, GBP could edge higher but any advance is viewed as part of a 1.2980/1.3045 range (a sustained rise above 1.3045 is unlikely).”
Next 1-3 weeks: “We highlighted last Friday (17 Jan, spot at 1.3075) that only a break of the ‘strong resistance’ level of 1.3130 would indicate that a short-term bottom is in place. We added, “until then, there is still a slim chance of GBP moving below 1.2955”. GBP subsequently popped to a high of 1.3120 before staging a surprisingly sharp decline and ended the day markedly lower at 1.3007 (-0.53%). While the price action suggests that downside risk remains intact, downward momentum has not improved by much. To look at it another way, while GBP could dip below 1.2955, the next support at 1.2900 may not come into the picture. On the upside, the ‘strong resistance’ level has moved lower to 1.3090 from last Friday’s level of 1.3130.”