GBP/USD: Door remains open to further downside – UOB

Cable still risks extra losses, although a drop to 1.3400 appears unlikely for the time being, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘there is room for GBP to dip to 1.3430 first before a more sustained rebound can be expected’. GBP subsequently dipped to 1.3436 before rebounding sharply to close slightly higher at 1.3507 (+0.12%). Downward pressure has dissipated and GBP is likely to trade sideways for today, expected to be within a range of 1.3460/1.3550.”

Next 1-3 weeks: “On Monday (24 Jan, spot at 1.3550), we highlighted that GBP is likely to trade with a downward bias towards 1.3500. After GBP plummeted to 1.3441, we highlighted yesterday (25 Jan, spot at 1.3485) that while further GBP weakness is likely, oversold shorter-term conditions suggest that a slower pace of decline and the next support at 1.3400 may not come into the picture so soon. There is no change in our view for as GBP subsequently dropped to 1.3436 before rebounding. Downward pressure has eased somewhat but only a breach of 1.3575 (no change in ‘strong resistance’ level from yesterday) would indicate that 1.3400 is out of reach.”