The Pound Sterling (GBP) is likely to continue to weaken; the 1.2940 level is expected to provide strong support. GBP must break and remain below 1.2940 before a resumption of weakness can be expected, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Weakness to resume after a break below 1.2940
24-HOUR VIEW: “After GBP rose last Friday, we highlighted yesterday (Monday) that ‘Despite the advance, there is no significant increase in momentum, and instead of continuing to rise, GBP is more likely to trade sideways between 1.3010 and 1.3070.’ The subsequent sharp drop that reached a low of 1.2978 was surprising. Today, GBP is likely to continue to weaken, even though the 1.2940 level is expected to provide strong support. Resistance is at 1.3000; a breach of 1.3020 would indicate that the current downward pressure has faded.”
1-3 WEEKS VIEW: “After holding a negative GBP stance since the start of the month, we turned neutral yesterday (21 Oct, spot at 1.3050), indicating that ‘the weakness in GBP has ended, and for the time being, it is likely to trade in a range between 1.2980 and 1.3130.’ We did not anticipate the subsequent sharp decline that reached a low of 1.2984. Downward momentum has increased, but not enough to suggest the resumption of GBP weakness. GBP must break and remain below 1.2940 before further declines can be expected. The likelihood of GBP breaking clearly below 1.2940 will remain intact, provided that the ‘strong resistance’ level at 1.3060 is not breached in the next couple of days.”
