GBP/USD: Diminishing chances for a drop to 1.3050 – UOB

In opinion of FX Strategists at UOB Group, a drop of GBP/USD to the 1.3050 area appears to be losing momentum for the time being.

Key Quotes

24-hour view: “Yesterday, we highlighted that ‘the bias still appears to be on the downside but any decline is unlikely to threaten the major support at 1.3050’. Our view was incorrect as GBP rebounded to 1.3188 before closing at 1.3187 (+0.65%). Despite the rebound, upward momentum has not improved by all that much. From here, GBP could edge higher to 1.3205 before easing off. The strong resistance at 1.3250 is unlikely to come under challenge. Support is at 1.3130 followed by 1.3100.”

Next 1-3 weeks: “We have held a negative view in GBP for about 2 weeks now. In our latest narrative from yesterday (09 Mar, spot at 1.3105), we highlighted that while the downside risk is intact, oversold conditions suggest a slower pace of decline. We did not quite expect the subsequent strong rebound to 1.3188. There is no change in our view but after the bounce yesterday, the chance for GBP to move to 1.3050 has diminished. Overall, only a breach of 1.3250 (no change in ‘strong resistance’ level from yesterday) would indicate that the weak phase has run its course.”