GBP/USD still focused on 1.2920/25 – Commerzbank

Cable’s attention remains on a potential test of 1.2920/25 in the near term, said FX Strategists at UOB Group.

Key Quotes

24-hour view: “Expectation for sideway trading was clearly wrong as GBP plummeted and cracked the major 1.3000 support before ending the day not far above the day’s low of 1.2957 (NY close of 1.2967). In view of the strong downward momentum, further GBP weakness is expected. However, the major 1.2920/25 level could be just out of reach for today (there is another support near 1.2900). On the upside, we expect 1.3030 to be strong enough to cap any intraday GBP strength (minor resistance is at 1.3000)”.

Next 1-3 weeks: “We first painted the scenario that “a break of 1.3000 would suggest shift the focus to 1.2920/25” last Friday (19 Oct, spot at 1.3020). The ‘key resistance’ for our view at 1.3125 remains intact as GBP touched a high of 1.3105 during late NY hours on Friday. Brexit headlines during London hours yesterday sent GBP reeling and the crack of 1.3000 support resulted in a quick drop to a low of 1.2957. Downward momentum has improved considerably and the focus is at 1.2920/25 now. At this stage, the probability for a sustained break of this major support is not very high but the odds would continue to improve unless GBP can reclaim the ‘key resistance’ at 1.3080 (level previously at 1.3125). On a short-term note, 1.3030 is already a strong level. Looking ahead a break of 1.2920/25 would suggest GBP is ready to tackle next support at 1.2870”.