GBP/USD a breach of 1.2775 could allow a test of 1.2720 – UOB

FX Strategists at UOB Group sees Cable could accelerate losses to the 1.2720 region on a break below 1.2775.

Key Quotes

24-hour view: “While we expected a lower GBP yesterday, we were of the view that the “major support at 1.2775 is unlikely to yield so easily”. In line with expectation, GBP hit a low of 1.2779 before recovering quickly. Downward momentum has eased with the rebound and while another attempt to move below 1.2775 is not ruled, a clear and sustained break below this level is not expected (next support at 1.2745). On the upside, only a move back 1.2855 would indicate that the current weakness has stabilized (minor resistance at 1.2830)”.

Next 1-3 weeks: “GBP touched a low of 1.2779 yesterday, just a few pips above the revised target of 1.2775. While clearly oversold, there is no sign of stabilization just yet and another push lower would not be surprising. That said, GBP has to ‘punch’ below 1.2775 as a slow drift lower amidst the current oversold conditions would increase the risk of a short-term low. The next support below 1.2775 is at 1.2720. On the upside, resistance is at 1.2855 but only a move back above 1.2900 (stop-loss level adjusted lower from 1.2920) would indicate that the bearish phase that started on 07 Aug (spot at 1.3045) has ended”.