GBP/USD now seen between 1.3000 and 1.3230 – UOB

Cable is expected to remain side-lined for the time being, likely between 1.30 and 1.3230, in opinion of FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected ‘further GBP strength’ yesterday. GBP subsequently rose to a fresh high of 1.3266 before plunging suddenly and sharply during NY hours. The rapid drop appears to be running ahead of itself. That said, the decline appears to have enough impetus to extend lower towards 1.3060. For today, a sustained move below this level is unlikely. Resistance is at 1.3135 followed by 1.3175.”

Next 1-3 weeks: “While we have got our calls wrong before, it is not often that we were proven wrong within a single day. Yesterday (19 Aug, spot at 1.3245), we held the view that GBP ‘could advance further to 1.3340’. GBP subsequently rose to a fresh high of 1.3266 before staging a sharp sell-off that sent it below our ‘strong support’ level at 1.3120 (low of 1.3095). The price actions resulted in an ‘outside reversal bar’ and suggest that 1.3266 could be a short-term top. While GBP is likely to trade below 1.3266 for now, it is premature to expect the start of a major reversal (after the recent strong rally in recent weeks). From here, GBP is more likely to consolidate and trade between 1.3000 and 1.3230. Looking forward, if there is a clear break of 1.3000, it would increase the risk of a more sustained and deeper pullback in GBP.”