Rapidly increasing downward momentum suggests Pound Sterling (GBP) could continue to decline, potentially dropping below 1.3485. In the longer run, GBP is now neutral; it is likely to trade in a range between 1.3415 and 1.3585, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
GBP might continue to decline
24-HOUR VIEW: “Following last Friday’s price movements, we stated yesterday, Monday, that ‘the price movements still appear to be part of a consolidation phase, most likely between 1.3520 and 1.3585.’ However, after edging to a high of 1.3563, GBP then fell sharply, reaching a low of 1.3502. GBP subsequently closed on a soft note at 1.3503, lower by 0.33%. The rapidly increasing downward momentum suggests GBP could continue to decline today, potentially dropping below the strong support at 1.3485. Currently, GBP does not appear to have enough momentum to reach 1.3415. To keep the momentum going, GBP must hold below 1.3550, with minor resistance at 1.3525.”
1-3 WEEKS VIEW: “We have held a positive view on GBP since early this month (as annotated in the chart below). In our latest narrative from last Thursday (14 August, spot at 1.3580), we indicated that ‘the outlook for GBP remains positive, and it may rise to 1.3620.’ We also indicated that ‘the chances of it reaching 1.3660 this time around are more limited.’ Yesterday, GBP dropped to a low of 1.3502. Although our ‘strong support’ level at 1.3485 has not been breached yet, upward pressure has eased. From here, we are revising our view to neutral, and now expect GBP to trade in a range, most likely between 1.3415 and 1.3585.”
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