British Pound: Downside risks linger against US Dollar – UOB

UOB economists Quek Ser Leang and Lee Sue Ann keep a cautious stance on GBP/USD after the pair briefly broke below 1.3490 to 1.3485 before rebounding. For the next day, they expect consolidation between 1.3500 and 1.3560 as downside momentum eases. Over 1–3 weeks, the bias stays negative, but odds of a move to major support at 1.3455 have not risen significantly.

Pound consolidates after sharp drop

"24-HOUR VIEW: GBP fell more than we expected two days ago. When GBP was at 1.3535 yesterday, we highlighted the following: “Our directional view was correct, but we did not expect GBP to drop sharply to 1.3500. The decline is oversold, but this time around, there is a chance for GBP to drop to 1.3490 before stabilisation can be expected. We do not expect the next support at 1.3455 to come into view.” Our assessments were not wrong, as GBP dropped to 1.3485 before rebounding to close at 1.3524 (-0.12%). Downward momentum has slowed somewhat, but it is premature to expect a sustained recovery. Today, we expect GBP to consolidate, most likely between 1.3500 and 1.3560."

"1-3 WEEKS VIEW: We revised our GBP view to negative yesterday (13 May, spot at 1.3535), indicating that GBP “could drop further to 1.3490, with lower odds of reaching the major support at 1.3455.” GBP subsequently dropped below 1.3490 (low of 1.3485) before recovering. While we maintain our negative GBP view, given that there has been no further increase in downward momentum, the odds of GBP dropping to 1.3455 have not increased by much. On the upside, a breach of 1.3580 (‘strong resistance’ level was at 1.3605 yesterday) would indicate that 1.3455 is out of reach."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)