Conditions are deeply oversold, but there is no clear sign that Pound Sterling (GBP) weakness has stabilised against US Dollar (USD); any further decline is unlikely to reach 1.3300. In the longer run, price action continues to suggest GBP weakness; the next technical target is 1.3300, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
Price action continues to suggest GBP weakness
24-HOUR VIEW: “Following the sharp drop in GBP last Friday, we indicated yesterday that ‘while conditions are oversold, the decline has not stabilised’. We pointed out that ‘as long as GBP holds below 1.3480, it could test 1.3400’. We also pointed out that ‘the major support at 1.3365 is unlikely to come into view’. Our directional view was correct, but we did not expect GBP to breach both 1.3400 and 1.3365 so easily (low has been 1.3352). Although conditions are deeply oversold, there is still no clear sign that the decline has stabilised. That said, any further decline is unlikely to reach 1.3300 (note that there is another support level at 1.3335). Resistance levels are at 1.3390 and 1.3420.”
1-3 WEEKS VIEW: “While we turned negative on GBP yesterday (28 Jul, spot at 1.3440), we noted that ‘it is too early to determine if it can reach the major support at 1.3365’. Our view was correct, but we did not anticipate the sharp plunge to 1.3352. The price action continues to suggest GBP weakness, and the next technical target is 1.3300. We will maintain our negative view as long as 1.3465 (‘strong resistance’ level was at 1.3510 yesterday) is not breached.”
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