GBP/USD could retest 1.26 on failure to defend 1.2850/1.2790 – SocGen

Cable climbs off the lows. Economists at Société Générale analyze GBP/USD technical outlook.

An initial bounce is expected, however, 1.3025 is likely to contain

GBP/USD up-move faced stiff resistance near projections of 1.3100/1.3180 which is also the upper limit of a multi-month channel. A steady wave of pullback has brought it back towards the peak of June and a steeper ascending trend line at 1.2850/1.2790; this is first layer of support. An initial bounce is expected however 1.3025, the 61.8% retracement of recent down move is likely to contain. 

In case the pair fails to defend 1.2850/1.2790, a retest of the lower band of the channel at 1.2600 can’t be ruled out.