GBP/USD risks further downside – UOB

FX Strategists at UOB Group noted the neutral stance on Cable, which risks another leg lower in the short  term.

Key Quotes

24-hour view: “The sharp drop in GBP last Friday that sliced through several strong support levels with ease was unexpected. The decline appears incomplete and further extension to 1.4040 would not be surprising (last week’s low at 1.3980 is not expected to come into the picture for now). Resistance is at 1.4140 followed by 1.4180”.

Next 1-3 weeks: “While we highlighted last Friday (02 Feb, spot at 1.4265) that it is “too early to expect a resumption bullish phase”, the subsequent rapid decline that easily took out a couple of strong support levels with ease came as a surprise. The immediate pressure has shifted quickly to the downside but it is too soon to expect a sustained down-move. However, the weak undertone could lead to a test of last week’s 1.3980 low but a clear break below this level seems unlikely at this stage. Overall, GBP is expected to stay under pressure over the next several days unless it can reclaim 1.4230. On a shorter-term note, 1.4180 is already a strong level”.