GBP/USD looks to a potential drop to 1.3500 – UOB

In opinion of FX Strategists at UOB Group, GBP/USD could still grind lower to the 1.3500 region in the near term.

Key Quotes

24-hour view: “We expected GBP to weaken last Friday but we were of the view that ‘any weakness is unlikely to break the major support at 1.3560’. The subsequent weakness exceeded our expectations as GBP fell to 1.3546 before settling on a soft note at 1.3551 (-0.31%). Downward momentum has improved and further weakness appears likely. That said, oversold conditions suggest that 1.3500 is likely out of reach for today (there is another support at 1.3520). On the upside, a breach of 1.3590 (minor resistance is at 1.3570) would indicate that the current weakness has stabilized.”

Next 1-3 weeks: “Last Thursday (20 Jan, spot at 1.3615), we highlighted that while the underlying tone has softened, we continue to expect GBP to trade between 1.3560 and 1.3725. We added, ‘looking ahead, a clear break 1.3540 would indicate that GBP is ready to head lower in a sustained manner’. GBP dropped to 1.3546 on Friday and while 1.3540 is not breached, improved shorter-term downward momentum suggests that GBP is likely to trade with a downward bias towards 1.3500. The downward bias is intact as long as GBP does not move above the ‘strong resistance’ level, currently at 1.3610.”