GBP/USD: Still room for further pullbacks – UOB

In the view of Economist Lee Sue Ann and Markets Strategist Que Ser Leang at UOB Group, GBP/USD still risks extra declines in the next few weeks.

Key Quotes

24-hour view: “We expected GBP to trade in a range between 1.2385 and 1.2465 yesterday. In London trade, GBP popped briefly to 1.2470 and then plummeted to end the day at 1.2366 (-0.40%). While the rapid drop appears to be oversold, GBP could drop below 1.2350. That said, the next major support at 1.2300 is unlikely to come into view today. The downside risk is intact as long as GBP stays below 1.2435 (minor resistance is at 1.2400).”

Next 1-3 weeks: “We turned negative in GBP about two weeks ago on 12 May, when GBP was trading at 1.2515. Yesterday (24 May, spot at 1.2420), we indicated that ‘the downside risk in GBP is intact as long as it does not break above 1.2500’. In NY trade, GBP dropped to a low of 1.2358, not far above our target of 1.2350. The price actions continue to suggest downside risk in GBP. A clear break below 1.2350 will shift the focus to 1.2300. On the upside, a breach of 1.2470 (‘strong resistance’ level previously at 1.2500) would indicate that GBP is not weakening further.”