GBP/USD downside bias still persists – UOB

In opinion of FX Strategists at UOB Group, Cable is expected to keep the offered bias in the near term.

Key Quotes

24-hour view: “While the 1.2555 level held as expected, the subsequent sharp and swift rebound from a low of 1.2560 was not exactly expected. The rapid bounce suggests that 1.2560 could be an interim low and this level is not expected to come into the picture. That said, it is too soon to expect a sustained up-move. From here, there is room for GBP to edge higher but the strong 1.2685 resistance is unlikely to yield so easily. Support is at 1.2615, 1.2590”.

Next 1-3 weeks: “While we expect GBP to trade with a “downside bias”, we were of the view that “GBP has to register a daily closing below 1.2600 in order to indicate the start of a ‘negative phase’ towards 1.2530”. GBP subsequently dipped briefly to 1.2560 before rebounding strongly to end the day higher by +0.15% (NY close of 1.2629). Despite the sharp bounce, only a move above 1.2685 would indicate that the current downward pressure has eased. Until then, another ‘stab’ on the downside is not ruled out but after last Friday’s price action, GBP is unlikely to move into a fresh ‘negative phase’ (more likely to consolidate and trade sideways at these lower levels)”.