GBP/USD: Solid support emerges around 1.3300 – UOB

While further downside remains on the cards, Cable is expected to meet a tough support in the 1.3300 zone, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected GBP to weaken yesterday but we were of the view that ‘the major support at 1.3400 could be out of reach’. The subsequent weakness exceeded our expectations as GBP dropped to 1.3360. Deeply oversold conditions suggest that GBP is unlikely to weaken much further. For today, GBP is more likely to trade between 1.3350 and 1.3440.”

Next 1-3 weeks: “We have expected GBP to weaken since Monday (24 Jan, spot at 1.3550). As GBP declined, in our latest narrative from 25 Jan (spot at 1.3485), we highlighted that while further GBP weakness is likely, oversold shorter-term conditions suggest that that ‘1.3400 may not come into the picture so soon’. After trading sideways for a couple of days, GBP cracked 1.3400 yesterday (27 Jan) and dropped to 1.3360. Downward momentum has been boosted and GBP could weaken further. That said, any decline is expected to face solid support at 1.3300. Overall, the downside risk is intact as long as GBP does not move above the ‘strong resistance’ at 1.3485 (level was at 1.3545 yesterday).”