GBP/USD bearish, could test 1.2970 – UOB

In opinion of FX Strategists at UOB Group, Cable remains bearish and could re-test the 1.2970 area in the next weeks.

Key Quotes

24-hour view: “The target indicated at 1.3025/30 last Friday was not met as GBP recovered after touching a low of 1.3040. Downward momentum has eased and the current movement is viewed as part of a consolidation phase. In other words, sideway trading is expected for today, likely between 1.3040 and 1.3135”.

Next 1-3 weeks: “GBP plunged after BOE’s decision to raise rate for the first time in a decade. While the outsized decline has shifted the outlook for GBP to bearish, the down-move is already approaching the major 1.3025/30 level (last month’s low as well as rising trend-line support). The rapid drop appears to be running ahead of itself but a dip below 1.3025/30 would not be surprising and this could lead to a test of the next support near 1.2970. The next significant support is at 1.2870 and at this stage, the prospect of a move towards this level is not high. On the upside, the key level is at 1.3320 (this week’s high) but if GBP can move and stay above 1.3200 (‘stop-loss’ level), it would be enough to indicate that a temporary low is in place. On a shorter-term note, 1.3135 is already a strong resistance”.