GBP/USD risks a drop to 1.2270 – UOB

Cable carries the potential to slip back to the 1.2320 area in the next weeks, suggested FX Strategists at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that GBP ‘could continue to weaken towards 1.2365’. We added, ‘for today, the next support at 1.2320 is not expected to come under threat’. Our view was not wrong as GBP dropped to a low of 1.2344 before ending the day on a soft note at 1.2349 (-0.64%). Despite severely oversold conditions, the weakness in GBP is not showing any sign of stabilization just yet. From here, only a move above 1.2410 would indicate that the weakness has stabilized (minor resistance is at 1.2375). Until then, GBP could edge lower but the next support at 1.2270 is likely out of reach for today. There are a couple of relatively strong support levels at 1.2320 and 1.2300.”

Next 1-3 weeks: “There is not much to add to our update from last Friday (19 Jun, spot at 1.2425). As highlighted, GBP ‘could decline towards 1.2320, possibly as low as 1.2270’. The pace of the subsequent decline was faster than anticipated as GBP dropped to a low of 1.2344 during NY hours last Friday. Downward momentum remains strong and 1.2320 could be within reach soon. A clear break of this level would shift the focus to 1.2270. At this stage, it is left to be seen if GBP can maintain a toe-hold below 1.2270. Overall, GBP is expected to stay under pressure unless it can move above 1.2480 (‘strong resistance’ level was at 1.2550 last Friday).”