GBP/USD: Rising bets for a drop below 1.1415 – UOB

In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, GBP/USD could slip back below the 1.1415 region in the next weeks.

Key Quotes

24-hour view: “Last Friday, we expected GBP to weaken but we were of the view that it ‘may not be able to maintain a foothold below 1.1500’. Our view did not quite materialize as GBP rose to 1.1589 before dropping to a low of 1.1497 during late NY hours. GBP fell sharply during early Asian hours and moved clearly below 1.1500. Further decline appears likely but the next major support at 1.1415 is likely out of reach for today. On the upside, a breach of 1.1535 (minor resistance is at 1.1505) would indicate that the weakness in GBP has stabilized.”

Next 1-3 weeks: “In our latest narrative from last Friday (02 Sep, spot at 1.1545), we held the view that further GBP weakness is likely but it is left to be seen if the Mar 2020 low near 1.1415 is within reach this time round. GBP closed at 1.1520 (0.21%) in NY but dropped sharply upon opening in Asian today. Downward momentum has improved rapidly and the chance for a sustained decline below 1.1415 has increased. Looking ahead, a clear break of 1.1415 would shift the focus to 1.1300. Overall, only a break of 1.1605 (‘strong resistance’ level was at 1.1635 last Friday) would indicate that the weakness in GBP that started early last week has run its course.”