In opinion of FX Strategists at UOB Group, the near-term outlook for Cable still points to further downside, although a test of the 1.3400 zone appears not favoured for the time being.

Key Quotes

24-hour view: “We expected GBP to ‘weaken further’ yesterday but we were of the view that ‘1.3500 is likely out of reach’. However, GBP easily breached 1.3500 as it plunged to 1.3441 before recovering slightly. While deeply oversold, the weakness in GBP has yet to stabilize. For today, there is room for GBP to dip to 1.3430 first before a more sustained rebound can be expected. The major support at 1.3400 is unlikely to come into the picture. On the upside, a break of 1.3535 (minor resistance is at 1.3510) would indicate that the current weakness in GBP has stabilized.”

Next 1-3 weeks: “Yesterday (24 Jan, spot at 1.3550), we highlighted that GBP is likely to trade with a downward bias towards 1.3500. While our shift to a negative stance in GBP was timely, we did not expect the swift and sharp drop as GBP easily took out the support at 1.3500 and plunged to 1.3441. Downward momentum has improved considerably and further GBP weakness is likely. That said, oversold shorter-term conditions suggest that a slower pace of decline and the next support at 1.3400 may not come into the picture so soon.”