GBP/USD: Further downside is not favoured – UOB

Following Monday’s price action, a deeper pullback in Cable now appears to have lost momentum, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “Our view for GBP yesterday was that it ‘could test the 1.2450 support first before a more sustained recovery can be expected’. GBP subsequently dropped to 1.2455 before staging a surprisingly swift and sharp rebound to an overnight high of 1.2606. The firm price action after NY close suggests GBP could continue to move higher. While a break of the strong resistance at 1.2650 would not be surprising, a move beyond 1.2710 would come as a surprise. The current upward pressure is deemed to be intact unless GBP moves below 1.2570 (minor support is at 1.2595).”

Next 1-3 weeks: “We highlighted last Friday (12 Jun, spot at 1.2570) that the pullback in GBP ‘could extend to 1.2450, possibly as low as 1.2400’. GBP dropped to 1.2455 yesterday (15 Jun) before rebounding in a strong and rapid manner. The rapid bounce appears poised to move above the ‘strong resistance’ level at 1.2650. A breach of the ‘strong resistance’ would indicate that the corrective pullback has ended sooner than anticipated (and that GBP has moved into a consolidation phase). In other words, the odds for deeper pull-back in GBP have diminished considerably.”