GBP/USD now focuses on 1.3735 – UOB

In opinion of FX Strategists at UOB Group, Cable faces a deeper pullback on a close below 1.3735.

Key Quotes

24-hour view: “We expected GBP to strengthen yesterday but we were of the view that ‘1.3910 is unlikely to come into the picture’. While our view was not wrong as the initial advance in GBP stalled at 1.3898, the subsequently sharp sell-off from the high came as a surprise (overnight low of 1.3773). The rapid drop appears to be overdone but with no signs of stabilization just yet, GBP could test 1.3760 first before a recovery can be expected. Last week’s low near 1.3735 is not expected to come under threat. Resistance is at 1.3835 but only a breach of 1.3860 would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “On Monday (05 Jul, spot at 1.3830), we highlighted that GBP is likely to trade between 1.3760 and 1.3910 for now. GBP rose to 1.3898 yesterday (06 Jul) before plunging to 1.3773. Downward momentum is beginning to build and a breach of 1.3760 would not be surprising. However, GBP has to close below 1.3735 before a sustained decline can be expected. The prospect for GBP to close below 1.3735 is not high for now but it would remain intact unless GBP moves above the ‘strong resistance’ level at 1.3880 within these few days.”