GBP/USD: A test of 1.2800 appears on the cards – UOB
In opinion of FX Strategists at UOB Group, Cable could recede further and re-visit the 1.2800 zone in the short-term horizon.
24-hour view: “We expected GBP to weaken yesterday but were of the view that ‘a sustained break of 1.2850 appears unlikely’ and highlighted ‘minor support is at 1.2870’. GBP dipped briefly to 1.2873 before recovering. The combination of rapidly waning downward momentum and oversold conditions suggest the current movement is part of a consolidation phase. In other words, the major 1.2850 level is likely to remain unchallenged for now as GBP is expected to trade sideways between 1.2885 and 1.2965.”
Next 1-3 weeks: “We highlighted the ‘increased risk of a break of 1.2900’ last Friday (07 Feb, spot at 1.2930) and indicated ‘the next support level of note below 1.2900 is at 1.2850’. GBP subsequently dropped to 1.2882 before ending the day on a weak note at 1.2883 (-0.34%). The near-term risk remains on the downside and a breach of 1.2850 would expose the next support at 1.2800. On the upside, the ‘strong resistance’ level has moved lower to 1.2980 from 1.3020. Only a breach of this ‘strong resistance’ would indicate the current weakness has stabilized.”