GBP/USD: Upside mitigated on a breach of 1.3860 – UOB

Cable’s positive phase could be over below the 1.3860 level in the short term, noted FX Strategists at UOB Group.

Key Quotes

24-hour view: “We expected GBP to ‘consolidate and trade between 1.3915 and 1.3985’ last Friday. GBP subsequently rose to within one pip of the top of our expected range (high of 1.3984) before staging a sharp and rapid pullback to 1.3888. The pullback has room to extend lower but a clear break of the strong support at 1.3860 appears unlikely (next support is at 1.3820). Resistance is at 1.3925; a break of 1.3955 would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “We highlighted last Friday (30 Jul, spot at 1.3955) that overbought shorter-term conditions could lead to consolidation first but GBP is likely to advance to 1.4000 later on. GBP subsequently rose to 1.3984 before pulling back sharply. While upward momentum has diminished, only a break of 1.3860 (no change in ‘strong support’ level) would indicate that the positive phase in GBP that started about a week ago has run its course.”