GBP/USD faces further consolidation – UOB

FX Strategists at UOB Group suggested Cable could still embark in a consolidative theme in the short term.

Key Quotes

24-hour view: “The anticipated weakness in GBP exceeded our expectation by dropping below the 1.4000 support with a low of 1.3980. However, the subsequent surge higher from the low was unexpected. The strong up-move appears to be running ahead of itself and while a move above the overnight high of 1.4167 would not be surprising, a sustained move above the 1.4200 resistance seems unlikely. Support is at 1.4100 but only a move back below 1.4070 would indicate that the immediate upward pressure has eased”.

Next 1-3 weeks: “We just shifted from a bullish to a neutral stance on GBP yesterday (30 Jan) and there is no change to the view. GBP dipped to a low of 1.3980 before staging a surprisingly strong rebound to hit a high of 1.4167. The rapid and sharp swing higher is viewed as part of a consolidation and not a resumption of the recent bullish phase. That said, in view of the elevated volatility, the “relatively broad range of 1.3930/1.4200” highlighted yesterday is probably not ‘broad enough’ to contain the consolidation phase. From here, GBP could continue to trade choppily, likely within a 1.3930/1.4290 range”.