GBP/USD now looks to 1.2790 near term – UOB

Cable remains neutral and could now drop further and test the 1.2790 region, according to FX Strategists at UOB Group.

Key Quotes

24-hour view: “Instead of trading sideways (as expected yesterday), GBP plummeted and took out the major 1.2920/25 support. The drop is accompanied by strong downward momentum and there is scope for GBP to move below the overnight low of 1.2867. As the decline is oversold territory, any further weakness could be ‘limited’ to 1.2835/40 (next support is at 1.2790). Resistance is at 1.2910 followed by 1.2940”.

Next 1-3 weeks: “We first highlighted the possibility of a move to 1.2920/25 last Friday (19 Oct, spot at 1.3020) wherein we indicated a “break of 1.3000 would shift the focus to 1.2920/25”. The price action since then is line with our expectation even though the ease of which the strong 1.2920/25 level was taken out came as a surprise. We noted yesterday (24 Oct, spot at 1.2985), “looking ahead, a break of 1.2920/25 would suggest GBP is ready to tackle next support at 1.2870”. It seems that we have underestimated the strength of the current weakness as GBP plummeted to an overnight low of 1.2867. At this stage, there is no sign that GBP is ready for a bottom just yet and the next level to focus on is at 1.2790. All in, we continue to expect GBP to stay under pressure until it can reclaim the ‘key resistance’ at 1.2990 (level previously at 1.3080)”.