Cable remains firm and should now test the midpoint of 1.3400 in the coming weeks, FX strategists at UOB Group have suggested.
24 hour view: “The sharp rise in GBP last Friday which led to a huge gain of + 1.15% (1.3350) was a surprise. Further gains are not ruled out, but overbought conditions suggest a slower pace of progress and resistance at 1.3410 may be out of range (next resistance is at 1.3450). Support is at 1.3300 followed by 1.3260. “
Next 1-3 weeks: “We noted last Friday (August 28th, spot at 1.3210) that the GBP ‘could continue to trade unstably between the two major levels of 1.3000 and 1.300’. We added that “only a clear break in one or the other of the two levels would indicate the start of a more sustained directional movement”. That said, we didn’t anticipate how the GBP peaked at 1.3357 before closing sharply higher at 1.3350 (+ 1.15%). While the advance appears to be ahead of itself, robust momentum indicates further GBP strength is likely. From there, the GBP could strengthen towards 1.3450, although likely at a slower pace. Overall, the current positive phase in GBP is considered intact as long as it holds above the “solid support” level of 1.3220. “