GBP/USD: Weakness is not ruled out – UOB Group

Further Pound Sterling (GBP) weakness is not ruled out against US Dollar (USD); any declines are unlikely to reach the major support at 1.3375. In the longer run, the outlook for GBP remains negative; a move to 1.3375 is now expected, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

A move to 1.3375 is now expected

24-HOUR VIEW: "Following the sharp drop in GBP last Friday, we indicated yesterday (Monday) that 'the sharp drop has led to an increase in downward momentum.' We were of the view that GBP 'could test the significant support level at 1.3445.' However, we pointed out, 'Given that conditions are deeply oversold, a clear break below this level is unlikely.' The anticipated decline exceeded our expectation, as GBP dropped to a low of 1.3425. While further GBP weakness is not ruled out, conditions remain oversold, and any declines are unlikely to reach the major support at 1.3375 (expect 1.3400 to provide support as well). To sustain the oversold momentum, GBP must hold below 1.3475 (with minor resistance at 1.3455)."

1-3 WEEKS VIEW: "Yesterday (14 Jul, spot at 1.3495), we reiterated our negative GBP outlook, indicating that 'the next technical target is at 1.3445.' We also pointed out that 'if GBP were to break and hold below 1.3445, it may trigger a deeper decline towards June’s low, near 1.3375.' We did not quite expect GBP to breach 1.3445 so soon, as it fell to a low of 1.3425. The outlook for GBP remains negative, and we now expect a move to 1.3375. On the upside, should GBP break above 1.3520 (‘strong resistance’ was at 1.3575 yesterday), it would mean that the weakness from early this month (see annotations in the chart below) has stabilised."