GBP/USD: Downward momentum improves – UOB

Cable risks extra losses on a breach of 1.3790, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that we ‘continue to see chance for GBP to dip below 1.3860’ but we were of the view that ‘the major support at 1.3820 is unlikely to come into the picture’. The subsequent weakness in GBP exceeded our expectations as it dropped to 1.3814 before recovering slightly. While the risk is still on the downside, downward momentum has not improved by much and a break of the major support at 1.3790 is unlikely (the low near 1.3815 is already quite a strong support level). Resistance is at 1.3865 followed by 1.3885.”

Next 1-3 weeks: “We have maintained the same narrative since the middle of last week where GBP ‘could trade within a 1.3820/1.4020 range’. After about a week, GBP dipped below the bottom of our expected range (low of 1.3814 during London hours). While downward momentum is beginning to improve, only a NY closing below 1.3790 would indicate the start of a fresh weak phase in GBP. The prospect for such a move is not high for now but would increase unless GBP moves above 1.3905 within these few days.”