Can dip to 1.3080 before stabilisation – UOB Group

Weakness has not stabilized. The Pound Sterling (GBP) could dip to 1.3080 before stabilisation can be expected. In the longer run, price action suggests further GBP weakness; the next major support at 1.3000 may not come into view so soon, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

The next major support is at 1.3000

24-HOUR VIEW: “While we expected GBP to weaken yesterday, we were of the view that ‘the major support 1.3210 level is unlikely to come under threat.’ However, GBP not only broke below 1.3210 but also plunged further, reaching a low of 1.3093. Not surprisingly, after such an outsized decline, conditions are severely oversold, but given that the weakness has not stabilised, GBP could dip to 1.3080 before stabilisation can be expected. The major support at 1.3000 is not expected to come into view. Resistance levels are at 1.3160 and 1.3200.”

1-3 WEEKS VIEW: “Our most recent narrative was from Wednesday (02 Oct, spot at 1.3275), wherein for GBP to continue to weaken, it ‘has to break the major support at 1.3210.’ We highlighted that ‘the chance of GBP breaking clearly below 1.3210 appears to be on the high side, provided that it remains below 1.3355.’ Yesterday, GBP broke below 1.3210, plunging to 1.3093. GBP closed lower by a whopping 1.05% (1.3127), its second largest 1-day drop this year. Although the price action suggests further weakness, short-term conditions are severely oversold, and the next major support at 1.3000 may not come into so soon. The downside risk will remain intact provided that GBP does not break above 1.3255 (‘strong resistance’ level previously at 1.3355).”