In light of the recent price action, Cable could recede to the mid-1.2600s region in the next weeks.
24-hour view: “GBP dropped to a low of 1.2676 yesterday before rebounding to close little changed at 1.2726 (-0.06%). The price actions were in line with our expectations wherein GBP could weaken further but ‘1.2650 is likely out of reach for now’. While downward momentum has slowed, it is too soon to expect a sustained rebound. For today, GBP could drift downwards but any weakness is viewed as part of lower trading range of 1.2650/1.2760 (a sustained decline below 1.2650 is not expected).”
Next 1-3 weeks: “Yesterday (22 Sep, spot at 1.2820), we expected GBP ‘to trade with a downward bias towards 1.2730’ and we highlighted that GBP ‘has to close below this level before further weakness can be expected’. GBP subsequently dropped to 1.2711 before closing at 1.2734. While GBP did not close below 1.2730, downward momentum has improved considerably. In other words, GBP is likely to weaken further. The next support is at 1.2650. The current negative outlook for GBP is deemed as intact as long as it does not move above 1.2860 (‘strong resistance’ level was at 1.2930 yesterday).”