GBP/USD: Any decline is expected to face significant support at 1.2610 – UOB Group

Sharp sell-off seems excessive; the Pound Sterling (GBP) is likely to consolidate in a 1.2650/1.2725 range. In the longer run, bias for GBP appears to be tilted to the downside; any decline is expected to face significant support at 1.2610, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP appears to be tilted to the downside

24-HOUR VIEW: “Yesterday, we expected GBP to ‘trade in a sideways range of 1.2720/1.2785.’ GBP then rose a couple of pips above the upper end of our expected range (high has been 1.2787) before staging a surprisingly sharp drop, reaching a low of 1.2668. GBP closed lower by 0.61% at 1.2673. The sharp and swift sell-off seems excessive, and GBP is unlikely to weaken much further. Today, it is more likely to consolidate its loss, most likely trading in a range of 1.2650/1.2725.”

1-3 WEEKS VIEW: “We have a held positive GBP view since early this week. On Wednesday (11 Dec, spot at 1.2775), we highlighted that ‘upward momentum is beginning to slow, and GBP has to break above and hold above 1.2810 within these 1 to 2 days, or the chance of a rise to 1.2850 will diminish quickly.’ Yesterday (Thursday), GBP plummeted, breaking below our ‘strong support’ level at 1.2700. Upward momentum has dissipated. Downward momentum has increased slightly, and the bias for GBP appears to be tilted to the downside. That said, any decline is expected to face significant support at 1.2610. The downward bias will remain intact provided that the ‘strong resistance’ level, currently at 1.2755, is not breached.”