Prospects for the GBP / USD still suggest the probability of a deeper pullback in the coming weeks, note the currency strategists at UOB Group.
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24 hour view: “We highlighted yesterday that ‘the underlying tone still appears to be soft and we continue to see room for GBP / USD to test main support at 1.3700’. Instead of ‘test’ 1.3700, GBP / USD broke the level and plunged to 1.3631 The weakness in GBP / USD is clearly oversold, but with no signs of stabilization yet, GBP / USD could decline further. That said, last month’s low near 1.3575 is likely to be out of reach for now ( there is another support at 1.3600). On the upside, a breakout of 1.3690 (minor resistance is at 1.3665) would indicate that the current weakness has stabilized. “
Next 1-3 weeks: “On Wednesday (Aug 18, GBP / USD at 1.3745), we consider that ‘the strong and rapid decline earlier this week has room to extend to 1.3700, with decent odds of extension to 1.3670’. Our view on a GBP / Lower USD was correct, but we weren’t expecting how it extended its weakness as it plunged to 1.3631 yesterday. Keep in mind that the daily loss of -0.88% is the biggest 1-day decline in 2 months. As bearish conditions are oversold, a solid downside momentum suggests there is room for GBP / USD to decline further. The next big soprote is at the July low near 1.3575. Negative outlook for GBP / USD is considered intact as long as it doesn’t move above 1.3745 (‘strong resistance level’ was at 1.3805 yesterday). “
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