GBP/USD: A breach of 1.2300 should not be ruled out – UOB

Further downside in GBP/USD remains in the pipeline and could motivate the pair to break below the 1.2300 region in the near term, suggest Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: We did not anticipate GBP to trade in a very volatile manner, as it plummeted to 1.2333, snapped back up to a high of 1.2421, and then fell sharply to end the day at 1.2344 (-0.39%). Despite the choppy price action, downward momentum appears to have increased slightly. Today, GBP could dip below the major support at 1.2305. The next support at 1.2265 is likely out of reach for now. If GBP breaks above 1.2390 (minor resistance is at 1.2365), it would indicate that the current downward pressure has faded. 

Next 1-3 weeks: Our most recent narrative was from last Friday (15 Sep, spot at 1.2405), wherein 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.” Yesterday, GBP fell to a low of 1.2333. There is still no sign of stabilisation, and a break of 1.2305 will not be surprising. As conditions are approaching oversold, it remains to be seen if 1.2265 will come into view. Overall, only a breach of 1.2420 (‘strong resistance’ level previously at 1.2455) would indicate the weakness in GBP that started more than two weeks ago has stabilised.