GBP/USD risks extra losses below 1.3780 – UOB

In opinion of FX Strategists at UOB Group, Cable is forecast to lose accelerate the downside if 1.3780 is cleared in the next weeks.

Key Quotes

24-hour view: “While we expected GBP to weaken last Friday, we were of the view that ‘any weakness is likely limited to a test of 1.3880’. However, GBP briefly plunged to 1.3830 before rebounding. Despite the bounce, it appears too soon to expect a sustained recovery. Only a break of 1.3900 (minor resistance is at 1.3870) would indicate that the current weakness has stabilized. Until then, there is room for GBP to test 1.3780 first before a recovery can be expected. For today, the prospect for a sustained decline below 1.3780 level is not high.”

Next 1-3 weeks: “Last Friday (19 Mar, spot at 1.3920), we highlighted that the ‘outlook for GBP is neutral’ and it ‘is likely to trade between 1.3810 and 1.4010’. We did not anticipate the rapid manner by which GBP approaches the bottom of the expected range (GBP dropped to 1.3830). Downward momentum is beginning to improve but GBP has to close below the month-to-date low near 1.3780 before a sustained decline can be expected. At this stage, the prospect for such a move is not high but it would increase unless GBP can move above 1.3930 within these few days. Looking ahead, the next support level of note below 1.3780 is at 1.3700.”