In the opinion of UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, GBP/USD could still slip back to the 1.2300 region in the next few weeks.
24-hour view: After GBP fell to a low of 1.2380 last Friday, we highlighted yesterday that “conditions remain oversold, but with no signs of stabilisation just yet, GBP could dip to 1.2355 before the risk of a more sustained rebound increases.” Our expectation did not materialise as GBP traded in a relatively quiet manner between 1.2371 and 1.2410 before closing largely unchanged at 1.2385 (+0.02%). While downward momentum has slowed, it is premature to expect a rebound. Today, GBP could edge lower, but any decline is likely part of a lower range of 1.2355/1.2415. In other words, GBP is unlikely to break clearly below 1.2355.
Next 1-3 weeks: We have held a negative view in GBP for more than 2 weeks now. In our most recent narrative from last Friday (15 Sep, spot at 1.2405), we highlighted that the weakness in GBP has not stabilised, and GBP could continue to weaken. We pointed out that “The next level to watch is May’s low near 1.2305.” We continue to hold the same view. However, it is worth noting that downward momentum is beginning to slow. If GBP breaks above 1.2455 (‘strong resistance’ level previously at 1.2485), it would mean that the weakness in GBP has stabilised.