The Pound Sterling (GBP) is expected to trade with a downward bias and test 1.2130; the next major support at 1.2100 is unlikely to come into view. In the longer run, there has been a tentative buildup in momentum, but GBP must break clearly below the 1.2100/1.2130 support zone before further weakness can be expected, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.
A tentative buildup in momentum
24-HOUR VIEW: "Our view of GBP trading in a 1.2190/1.2280 range last Friday was incorrect. Instead of trading in a range, GBP fell to a low of 1.2161. Downward momentum appears to be building, albeit tentatively. Today, we expect GBP to trade with a downward bias. While there is a chance for it to test the 1.2130 level, it does not appear to have enough momentum to break clearly below this level. The next major support at 1.2100 is unlikely to come into view. To sustain the buildup in momentum, GBP must remain below 1.2215, with minor resistance at 1.2190."
1-3 WEEKS VIEW: "Our most recent narrative was from last Thursday (16 Jan, spot at 1.2240), wherein 'the recent weakness has stabilised,' and GBP 'is likely to trade in a range between 1.2130 and 1.2390.' Although GBP is still trading within the range, there has been a tentative buildup in momentum. That said, it is not enough to indicate a sustained decline. For a sustained decline, GBP must not only break clearly below 1.2130, but also 1.2100. The likelihood of GBP breaking clearly below this support zone will increase in the next few days, provided that the ‘strong resistance’ level, currently at 1.2305, is not breached."
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