Cable could move into a consolidative phase ahead of a probable test of the 1.4000 level, suggested FX Strategists at UOB Group.
24-hour view: “Our expectation for a higher GBP yesterday was correct but we did not anticipate the strong rise to 1.3985 (we were of the view that 1.3955 is likely out of reach). The advance is deep in overbought territory and this coupled with signs of weakening momentum indicates that GBP is unlikely to strengthen much further. For today, GBP is more likely to consolidate and trade between 1.3915 and 1.3985.”
Next 1-3 weeks: “We have expected GBP to strengthen since early this week. Yesterday (29 Jul, spot at 1.3880), we highlighted that there is room for GBP to advance further but overbought shorter-term conditions suggest that 1.3955 may not come into the picture so soon. However, GBP quickly and easily cracked 1.3955 as it rose to 1.3982 during NY session. Shorter-term conditions remain overbought and this could lead to a couple of days of consolidation first. As long as 1.3860 (‘strong support’ level was at 1.3800 yesterday) is not breached, an advance to 1.4000 would not be surprising. Looking ahead, the next resistance above 1.4000 is at 1.4050.”