The currency strategists of UOB Group noted that the outlook for the pound now points to further declines in the short term.
24-hour perspective: “Yesterday, we expected the UK currency to trade within a range of 1.4135 / 1.4200. Subsequently, the GBP tested the top of the expected range (1.4202 high) before making a surprisingly sharp and rapid decline to 1.4085. The rapid decline seems to be ahead of itself and, While the pound could fall below 1.4085, the next support at 1.4050 is unlikely to be threatened. Resistance is at 1.4125 followed by 1.4150 “.
Next 1-3 weeks: “We highlighted yesterday that the GBP has to close above 1.4250 or below 1.4090 before a more directional price action can be expected. Subsequently, the British pound plunged to 1.4085 before closing on a weak note at 1.4089 (-0.56%). While the risk to the British pound has shifted lower, it may be a while before it moves below 1.4050. That being said, if the GBP closes below 1.4050, it could potentially lead to a rapid decline towards the next support at 1.4000. The resistance is at 1.4150, but only a breakout of 1.4180 (‘strong resistance’ level) would indicate that downside risk has dissipated. “
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