The positive phase of the pound could end below the level of 1.3860 in the short term, FX strategists noted in UOB Group.
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24-hour outlook: “We expected the pound to consolidate and trade between 1.3915 and 1.3985 last Friday. It subsequently rose to a channel above our expected range (1.3984 high) before staging a sharp and rapid pullback to 1.3888. The retracement has room to extend lower, but a clear breakout of the strong support at 1.3860 seems unlikely (the next support is 1.3820). The resistance is at 1.3925; a break of 1.3955 would indicate that the current downward pressure has eased. “
Next 1-3 weeks: “We highlighted last Friday (Jul 30, pair at 1.3955) that short-term overbought conditions could lead to consolidation first, but the pound is likely to advance to 1.4000 later. The British currency subsequently rose to 1.3984 before to withdraw sharply. While the momentum to the upside has diminished, only a breakout of 1.3860 (no change in the ‘strong support’ level) would indicate that the positive phase in GBP that started about a week ago has run its course. “
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