GBP/USD: Scope for a drop to 1.2900 – UOB

If cable closes below 1.3000 it could spark a deeper retracement to the 1.2900 region, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that ‘while there is room for GBP to weaken, a break of the major support at 1.3050 appears unlikely’. The subsequently weakness exceeded our expectations as GBP dropped to 1.3028. Further weakness would not be surprising a break of 1.3000 seems likely. That said, the next major support at 1.2900 is not expected to under threat, at least not for today (there is another support at 1.2950). Resistance is at 1.3075 followed by 1.3100.”

Next 1-3 weeks: “Last Friday (11 Mar, spot at 1.3100), we highlighted that GBP could dip below 1.3050 but barring a surge in downward momentum, the next support at 1.3000 could be out of reach. GBP subsequently dropped to 1.3028. Downward momentum has increased, albeit not by much. From here, GBP could breach 1.3000 and if it can close below this support, it is likely trigger further weakness to 1.2900. Overall, the weak phase in GBP that started more than 2 weeks ago is intact as long as it does not move above 1.3170 (‘strong resistance’ level was at 1.3220 last Friday).”