If Cable clears the 1.2850 level, the downside could extend to the 1.28 region, in opinion of FX Strategists at UOB Group.
24-hour view: “Our view from last Friday that ‘the risk for GBP remains on the downside’ was correct. However, the anticipated ‘solid support’ at 1.2900 did not materialize as GBP cracked this level and dropped to 1.2882. The subsequent weak daily closing in NY of 1.2883 suggests further weakness GBP from here. That said, a sustained break of the major 1.2850 support appears unlikely (minor support at 1.2870). On the upside, only a move above 1.2940 would indicate that the current weakness has stabilized.”
Next 1-3 weeks: “We highlighted the ‘increased risk of a break of 1.2900’ last Friday (07 Feb, spot at 1.2930) and indicated ‘the next support level of note below 1.2900 is at 1.2850’. GBP subsequently dropped to 1.2882 before ending the day on a weak note at 1.2883 (-0.34%). The near-term risk remains on the downside and a breach of 1.2850 would expose the next support at 1.2800. On the upside, the ‘strong resistance’ level has moved lower to 1.2980 from 1.3020. Only a breach of this ‘strong resistance’ would indicate the current weakness has stabilized.”
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