GBP/USD: Any decline is likely part of a lower range of 1.3360/1.3445 – UOB Group

There is room for Pound Sterling (GBP) to weaken further against US Dollar (USD); any decline is likely part of a lower range of 1.3360/1.3445. In the longer run, c; the next technical target at 1.3320 may not come into view so soon, as it could consolidate first, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

GBP view is still negative

24-HOUR VIEW: "We had expected GBP to weaken on Monday. After GBP fell, we highlighted the following yesterday: 'The anticipated decline exceeded our expectation, as GBP dropped to a low of 1.3425. While further GBP weakness is not ruled out, conditions remain oversold, and any declines are unlikely to reach the major support at 1.3375. To sustain the oversold momentum, GBP must hold below 1.3475.' Our analysis was correct, as after rising briefly to a high of 1.3464 in the NY trade, GBP then dropped to a low of 1.3379. While conditions remain oversold, there is room for GBP to weaken further. That said, any decline is likely part of a lower range of 1.3360/1.3445. In other words, GBP is unlikely to break clearly below 1.3360 or above 1.3445."

1-3 WEEKS VIEW: "We turned negative on GBP early this month (see annotations in the chart below). Tracking the subsequent movements, we indicated yesterday (15 Jul, spot at 1.3425) that 'the outlook for GBP remains negative, and we now expect a move to 1.3375.' GBP then dropped to a low of 1.3379. We maintain our negative GBP view, even though the next technical target at 1.3320 may not come into view so soon – short-term oversold conditions could lead to consolidation first. On the upside, should GBP break above 1.3500 (‘strong resistance’ was at 1.3520 yesterday), it would mean that the weakness in GBP has stabilised."