GBP/USD still bearish, a test of 1.3458 loses traction – UOB

FX Strategists at UOB Group believe further weakness in Cable appears to have lost momentum in the near term.

Key Quotes

24-hour view: “GBP dropped sharply to a low of 1.3487 last Friday before rebounding quickly. Despite making ‘fresh’ low, the recent decline in GBP seems to be stabilizing and the odds for a clear break below the 1.3487 low are not high. GBP is more likely to trade sideways to slightly higher from here, expected to be within a 1.3500/1.3580”.

Next 1-3 weeks: “We highlighted last Friday (04 May, spot at 1.3570) that “in order to improve the prospect for a move to 1.3458, GBP has to stage an ‘impulsive and rapid’ break of the 1.3500 support”. GBP subsequently took out 1.3500 but rebounded quickly after touching a low of 1.3487. While further weakness to the year-to-date low at 1.3458 is still a possibility, shorter-term momentum has waned considerably and this coupled with oversold condition continues to suggest that the odds further weakness to 1.3458 are not high. On the upside, only a break of 1.3630 (‘stop-loss’ level previously at 1.3700) would indicate that the current bearish phase has ended”.