Cable sees a probable move to 1.3800 to be losing momentum in the short term, suggested FX Strategists at UOB Group.
24-hour view: “We highlighted last Friday that ‘upward momentum is beginning to ease and this coupled with still overbought conditions suggest that GBP is likely to consolidate within a range of 1.3680/1.3740’. We did not anticipate the sharp drop to 1.3654 during NY session. The rapid decline appears to be overdone and GBP is unlikely to weaken much further. For today, GBP is more likely to trade sideways at these lower levels, expected to be between 1.3650 and 1.3715.”
Next 1-3 weeks: “We have held a positive view in GBP for more than a week now. As GBP rose, in our latest narrative from last Friday (14 Jan, spot at 1.3710), we highlighted that ‘while there is still room for GBP to advance further, the next resistance at 1.3800 may not come into the picture so soon’. We added, ‘a breach of 1.3640 would indicate that the GBP strength has run its course’. That said, we did not anticipate the sharp pullback during NY session that hit a low of 1.3654. Upward momentum has waned and this coupled with overbought conditions suggests that that 1.3800 is likely out of reach. However, only a break of 1.3640 (no change in ‘strong support’ level) would indicate that GBP is unlikely to strengthen further.”