GBP/USD still neutral, scope for extra declines – UOB

Cable keeps the neutral outlook in the near term, while there is still room for further downside, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “While our expectation that “the major 1.2925/25 level could be out of reach” was correct, the sudden and sharp bounce from a low of 1.2937 came a surprise. The up-move was however short-lived as GBP dropped back as quickly from a high of 1.3044. The rapid swings have resulted in a mixed outlook and GBP could continue to trade in a choppy manner from here. That said, it is unlikely to move much out of yesterday’s 1.2937/1.3044 range”.

Next 1-3 weeks: “As highlighted, we continue to expect a lower GBP and the key level to focus on is at 1.2920/25. While GBP managed to register a ‘fresh’ low of 1.2937, the decline was short-lived as it rebounded quickly and hit a high of 1.3044 (before ending the day slightly higher at 1.2983, +0.12%). At this stage, we see no reason to change our view but as indicated yesterday, “the probability for a sustained break of 1.2920/25 is not very high but the odds would continue to improve unless GBP can reclaim the ‘key resistance’ at 1.3080”. Looking ahead, a break of 1.2920/25 would suggest GBP is ready to tackle next support at 1.2870”.