In opinion of FX Strategists at UOB Group, Cable risks further retracements if 1.3820 is cleared in the next weeks.
24-hour view: “We highlighted yesterday that ‘while the rapid decline appears to be running ahead of itself, GBP could continue to weaken towards 1.3845’. We added, ‘the next support at 1.3820 is likely ‘safe’ for now’. Our view was not wrong as GBP dropped to 1.3830 before rebounding. Downward pressure has eased and GBP is unlikely to weaken further. For today, GBP is more likely to consolidate and trade between 1.3830 and 1.3905.”
Next 1-3 weeks: “We have held a positive view in GBP for more than a week now. On Monday (15 Feb, spot at 1.3870), we noted that ‘the outlook for GBP is still positive but it may take a few days for 1.3950 to come into the picture’. GBP popped to a high of 1.3955 yesterday (16 Feb) before dropping sharply. Upward momentum has been dented and the odds for GBP to extend its recent gains to the next resistance at 1.4000 are not high. Unless GBP can move and stay above 1.3925 within these 1 to 2 days, a break of 1.3820 (no change in ‘strong support’ level from yesterday) would indicate that the current GBP strength has run its course.”