GBP/USD: Diminished odds for a move below 1.3735 – UOB

A close below the 1.3735 level in Cable seems to be losing momentum, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday ‘downward pressure has eased and the downside risk has more or less dissipated’ and we expected GBP to ‘trade sideways within a 1.3760/1.3850 range’. However, GBP dipped briefly to 1.3742 before recovering to close little changed at 1.3789 (-0.09%). Momentum indicators are mostly flat and we continue to expect GBP to trade sideways, expected to be within a 1.3755/1.3835 range.”

Next 1-3 weeks: “On Wednesday (07 Jul, spot 1.3800), we indicated that ‘downward momentum is beginning to build but GBP has to close below 1.3735 before a sustained decline can be expected’. Since then, GBP has not been able to make much headway on the downside as it traded in a relatively quiet manner for the past couple of days. While there is still chance for GBP to close below 1.3735, the odds for such a move have diminished. On the upside, a breach of 1.3880 (no change in ‘strong resistance’ level) would indicate that the downside risk has dissipated and GBP could trade sideways for a period of time.”