GBP/USD bearish reversal not likely for now – UOB

FX Strategists at UOB Group ruled out a shift to a bearish reversal in Cable for the time being at least.

Key Quotes

“While we have held the same view that the pullback in GBP “has room to extend lower” to 1.3800 since last Tuesday (06 Feb, spot at 1.3960), the ease of which this strong support was taken out on Friday was unexpected”.

“Despite the sharp decline, it appears premature to expect the start of a major bearish reversal but in view that GBP has rallied by more than 10 big figures from a low of 1.3027 (October last year) to a high of 1.4346 late last month, a deeper correction towards 1.3660 would not be surprising. This level is roughly about 50% retracement of the October to January rally and is also close to the rising trend-line support as well as the peak in Sep 2017”.

“A clear break below this major support would suggest that the 1.4346 high is a more significant top than currently expected. Regardless, GBP is expected to continue to stay under pressure in the coming days unless it can move and stay above 1.3940 (key short-term resistance previously at 1.4100)”.