GBP/USD could drop further and test 1.3700 – UOB

Cable’s downside carries the potential to visit the 1.3700 zone in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “After trading in a relatively quiet manner for a few days, GBP lurched lower and closed at a 1-month low of 1.3750 (-0.65%). While the rapid decline appears to be running ahead of itself, the weakness GBP could test the major support at 1.3700 first before stabilization can be expected. The next support at 1.3670 is unlikely to come into the picture. Resistance is at 1.3775 followed by 1.3800.”

Next 1-3 weeks: “On Monday (16 Aug, spot at 1.3865), we indicated that GBP is deemed to have moved into a consolidation phase and could trade within a 1.3800/1.3930 range. The rapid manner and ease by which GBP cracked the bottom of our expected range at 1.3800 came as a surprise as GBP dropped sharply and posted its biggest 1-day drop in a month (1.3750, -0.65%). The sharp and swift decline has scope to extend to 1.3700, with decent odds for extension to 1.3670. On the upside, a break of 1.3830 (‘strong resistance’ level) would indicate that GBP is not ready to head lower.”