The cable is now expected to trade within the 1.4080-1.4220 range in the next weeks, noted UOB Group’s FX Strategists.
24-hour view: “We expected GBP to ‘dip below the major support at 1.4100’ yesterday but we were of the view that ‘a break of last week’s low near 1.4080 appears unlikely’. However, GBP dropped to 1.4074 before staging a surprisingly strong and sharp rebound to 1.4178 during late NY hours. The rebound has scope to extend but a clear break of the major resistance at 1.4220 would come as a surprise (1.4195 is already quite a strong level). Support is at 1.4145 followed by 1.4120.”
Next 1-3 weeks: “We highlighted yesterday (10 Jun, spot at 1.4155) that ‘shorter-term downward momentum is beginning to improve’ but we were of the view that GBP ‘has to close below 1.4080 before a sustained decline can be expected’. We added, ‘the prospect for GBP to close below 1.4080 is not high but it would increase further as long as GBP does not move above 1.4185’. GBP subsequently dropped briefly to 1.4074 before rebounding strongly. While 1.4185 is still intact (high of 1.4178 in NY), the build-up in shorter-term momentum has fizzled out. In other words, GBP does not appear to be ready to move lower in a sustained manner. From here, GBP is more likely to trade within a relatively broad range of 1.4080/1.4220.”