GBP/USD: further downside not ruled out – UOB

FX Strategists at UOB Group noted Cable is likely to remain sidelined for the time being, although a move lower should not be discarded.

Key Quotes

24-hour view: “Our view last Friday was that GBP “could breach the 1.2150 support but is unlikely to challenge 1.2125”. In line with expectation, GBP touched 1.2140 before recovering slightly. Downward momentum has improved albeit not by much. From here, GBP could probe 1.2125 but the next support at 1.2100 is unlikely to come into the picture. On the upside, only a move above 1.2215 (minor resistance is at 1.2190) would indicate the current downward pressure has eased”.

Next 1-3 weeks: “GBP dropped to 1.2140 last Friday (30 Aug) before closing lower for the third straight day (1.2166, -0.13%). The underlying tone has weakened somewhat but for now, we continue the view price action as part of a consolidation (see update on 29 Aug). That said, the soft underlying tone suggests GBP would likely test the bottom of the expected 1.2100/1.2250 range first (expected range narrowed from 1.2100/1.2300). Looking forward, only a NY closing below 1.2100 would suggest that GBP is ready to extend its weakness to 1.2050, possibly retesting the August’s low of 1.2015”.