GBP/USD risks further decline near term – UOB

Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group see GBP/USD facing extra downside in the short-term horizon.

Key Quotes

24-hour view: Yesterday, we highlighted that “while downward momentum has waned somewhat, there is room for GBP to dip to 1.2200 today before the risk of a more sustained rebound increases.” Our view that GBP would weaken was not wrong, as it dropped to a low of 1.2195. While the weakness has not quite stabilised yet, severely oversold conditions coupled with tentative signs of slowing momentum suggest limited downside risk. Overall, GBP is likely to trade in a lower range of 1.2170/1.2245. In other words, GBP is unlikely to break clearly below 1.2170 or above 1.2245.

Next 1-3 weeks: In our latest narrative from last Friday (22 Sep, spot at 1.2290), we indicated that “while the outlook for GBP is still negative, any weakness may not have much room to go before stabilisation is likely.” We also indicated that “the next level to watch is 1.2200.” Yesterday (25 Sep), GBP fell to a low of 1.2195. While there is no sign of stabilisation yet, there is no significant improvement in downward momentum either. Overall, the weakness in GBP will remain in place as long as GBP stays below 1.2295 (‘strong resistance’ level previously at 1.2330). A breach of 1.2295 would indicate that the weakness in GBP that started early this month has ended. On the downside, the next level to watch is 1.2100.

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