GBP/USD: Door open for extra retracements – UOB

Cable still risks further losses in the short-term horizon, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “The sharp but short-lived plunge in GBP to 1.3195 and the subsequent strong rebound came as a surprise (we were expecting sideway-trading). The volatile price actions have resulted in a mixed outlook. From here, GBP could continue to trade in a choppy manner, albeit likely within a narrower range of 1.3240/1.3355.”

Next 1-3 weeks: “We have expected GBP to weaken since early last week. In our latest narrative from Monday (29 Nov, spot at 1.3330), we indicated that ‘there is room for GBP to drop to 1.3260’. We added, ‘a sustained decline below this level is unlikely’.  We did not anticipate the sharp plunge in GBP to 1.3195 yesterday and the subsequent sharp rebound. While further weakness is not ruled out, 1.3195 is a solid support and may not be easy to crack. On the upside, a break of 1.3390 (no change in ‘strong resistance’ level from yesterday) would indicate that the weakness in GBP has run its course.”