GBP/USD: Solid support emerges at 1.3160 – UOB

In opinion of FX Strategists at UOB Group, further downside in GBP/USD should meet strong support in the 1.3160 region in the short term.

Key Quotes

24-hour view: “While we expected GBP to weaken last Friday, we were of the view that ‘the major support at 1.3250 is unlikely to come under threat’. The subsequent weakness exceeded our expectations by a wide margin as GBP plunged by 0.88% (NY close of 1.3227). Further weakness is not ruled but oversold conditions suggest that any decline is expected to encounter solid support at 1.3160 (the low in 2021). Resistance is at 1.3255 followed by 1.3280.”

Next 1-3 weeks: “More than a week ago (25 Feb, spot at 1.3380), we highlighted that GBP could weaken further but there is a major support at 1.3250. GBP subsequently traded mostly sideways and in our latest narrative from last Friday (04 Mar, spot at 1.3330), we noted that ‘downward momentum still appears to be lackluster but there is still chance for GBP to decline to 1.3250’. GBP subsequently cracked 1.3250 as it dropped to a low of 1.3202. Downward momentum has improved and the risk is still on the downside. That said, there is another major support at 1.3160. On the upside, a breach the ‘strong resistance’ at 1.3330 (level was at 1.3420 last Friday) would indicate that the downside risk has dissipated. Looking ahead, the next support below 1.3160 is at 1.3100.”