GBP/USD looks at some consolidation near term – UOB

FX strategists at UOB Group keep the neutral stance on Cable in the very near term.

• "24-hour view: Contrary to our view of a slide towards 1.2025, GBP squeezed sharply to as high as 1.2150 in the European session before paring most gains to finish 1.2080 in NY. The hesitant price action suggests that GBP bulls have not regained control just yet. For today, we can reasonably expect consolidation between 1.2035 and 1.2130.
• Next 1-3 weeks: While we held the view yesterday (30 Jul, spot at 1.2225) that GBP has moved into a ‘negative phase’ and that it “could trade to 1.2110”, the subsequent rapid pace of decline was not exactly expected (GBP plunged to an overnight low of 1.2120). The downward acceleration over the past couple of days could be attributed to the lack of significant support levels. From here, if GBP were to crack 1.2110, it could lead to further steep decline as the next support is more than 100 pips lower at 1.1985. That said, 1.1985 is just a minor low in Jan 2017 (on the weekly chart) and it is left to be seen how much support it can offer (if GBP were to move to this level). Below this level, the more significant support would be the Oct 2016 ‘flash crash’ low of 1.1491. All in, despite being oversold, the current weakness in GBP is not showing sign of stabilizing just yet. Only a break of the 1.2195 ‘key resistance’ (level was at 1.2220 yesterday) would suggest that the decline in GBP is ready to take a breather”.