Downside pressure ebbed in GBP/USD – UOB

Cable could still grind lower to the mid-1.2900s despite the selling pressure seems to have lost some momentum, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We held the view yesterday that the ‘combination of waning momentum and oversold conditions suggest GBP has moved into a correction phase’. However, instead of ‘edging higher’, GBP surged above the 1.3045 resistance and touched an overnight high of 1.3083. The rapid rise appears to be over-extended and further sustained GBP strength is not expected. From here, GBP is more likely to consolidate its gains and trade sideways. Expected range for today, 1.3020/1.3090.”

Next 1-3 weeks: “We highlighted on Monday (20 Jan, spot at 1.3005), despite the sharp decline from last Friday’s 1.3120 peak, ‘downward momentum has not improved by much’. However, we held the view that GBP ‘could dip below 1.2955’. GBP soared by +0.29% yesterday (21 Jan) and touched 1.3083, just below our ‘strong resistance’ level of 1.3090. While downward pressure has eased considerably, only a breach of 1.3090 would indicate that GBP has moved into a sideway-trading phase. Until then, there is still a slim chance that GBP could dip below 1.2955.”