GBP/USD: Diminishing odds for a test of 1.2100 – UOB

In opinion of FX Strategists at UOB Group, the view that Cable could grind lower to the 1.2100 region has been losing momentum as of late.

Key Quotes

24-hour view: “Our expectation for GBP to ‘consolidate and trade between 1.2190 and 1.2290’ was wrong as it dropped to 1.2166 before recovering to end the day almost unchanged at 1.2233 (-0.01%). The combination of oversold conditions and waning momentum suggest that 1.2166 could be a short-term bottom. From here, GBP could edge higher but at this stage, any advance is viewed as part of a 1.2180/1..2270 range (a sustained rise above 1.2280 is not expected).”

Next 1-3 weeks: “We highlighted yesterday (14 May, spot at 1.2240) that GBP ‘could move lower towards last month’s low at 1.2166’. GBP subsequently touched 1.2166 before recovering to end the day largely unchanged at 1.2233 (-0.01%). While there is no change to the negative outlook for GBP, downward momentum is not exactly strong and the prospect for GBP to decline further to 1.2100 is not high. That said, only a break of 1.2355 (no change in ‘strong resistance’ level) would indicate that the current weak phase has run its course.”