GBP/USD negative, potential for further downside – UOB

Cable’s stance appears neutral while there is room for further downside pressure, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that the weakness in GBP “could extend to 1.3900, with lower odds for extension to 1.3855”. GBP dropped sharply albeit briefly below 1.3855 before rebounding strongly from a low of 1.3838. The rapid swing higher from the low suggests that a temporary base is in place. That said, it is too early to expect a sustained recovery. GBP is more likely to consolidate its recent loss and trade sideways at these lower levels. Expected range for today; 1.3910/1.4020”.

Next 1-3 weeks: “We highlighted yesterday that the pull-back in GBP “has room to extend lower” towards 1.3800. GBP touched a low of 1.3838 during NY hours before staging a rather sharp and rapid swing higher. Despite the bounce, the undertone remains weak and we continue to see chance for a test of 1.3800 in the coming days. A clear break of this level would indicate that the January’s peak of 1.4346 is a more important top than currently expected. On the upside, only a move back above 1.4100 would indicate that the immediate downward pressure has eased”.