FX Strategists at UOB Group keeps the neutral bias on Cable, adding that it has moved into consolidation phase.
24-hour view: “While we noted yesterday that “GBP has likely found a short-term top”, the sharp decline after the release of the weaker than expected UK inflation data came as a surprise. The rapid drop appears to be running ahead of itself but with no sign of stabilization just yet, further weakness is not ruled out. That said, in view of the already rather oversold condition, a sustained break below the next support at 1.4145 seems unlikely (the overnight low near 1.4175 is a minor support). Resistance is at 1.4245 but only a move above 1.4270 would indicate that the current weakness has stabilized”.
Next 1-3 weeks: “The weaker than expected UK inflation data sent GBP crashing below 1.4230 and the break of this ‘key support’ has put paid to our expectation for the rally in GBP to extend further to 1.4400. The 1.4377 high registered on Tuesday (17 Apr) is acting as a very strong resistance now and this level is unlikely to be threatened, at least not for the next several days. That said, the current GBP weakness is viewed as part of correction/consolidation phase and not the start of a major bearish reversal. From here, we expect GBP to trade sideways even though the near-term bias is for a probe lower towards the bottom of the expected 1.4080/1.4320 consolidation range”.