GBP/USD neutral, room for further decline – UOB

FX Strategists at UOB Group expects Cable to grind lower and to potentially test the 1.3840 zone.

Key Quotes

24-hour view: “While we highlighted yesterday that it is “too early to expect a sustained recovery”, the sharp drop in GBP came as a surprise. GBP hit a low of 1.3849 before rebounding weakly. The undertone is still negative and from a here, a dip below the 1.3838 low seen earlier this week would not be surprising but the major 1.3800 level is expected to offer solid support. Stabilization is only upon a move back above 1.3950 (minor resistance is at 1.3910)”.

Next 1-3 weeks: “We highlighted yesterday that the pull-back in GBP “has room to extend lower” towards 1.3800. GBP touched a low of 1.3838 during NY hours before staging a rather sharp and rapid swing higher. Despite the bounce, the undertone remains weak and we continue to see chance for a test of 1.3800 in the coming days. A clear break of this level would indicate that the January’s peak of 1.4346 is a more important top than currently expected. On the upside, only a move back above 1.4100 would indicate that the immediate downward pressure has eased”.