The Pound Sterling (GBP) is expected to drift lower; given the mild downward pressure, any decline is unlikely to break the support at 1.2710, and the chance of GBP dropping below 1.2665 is low, UOB Group FX analysts Quek Ser Leang and Peter Chia note.
A sustained break below 1.2710 is unlikely
24-HOUR VIEW: “Last Friday, GBP traded in a range of 1.2727/1.2773, closing largely unchanged (1.2756, +0.04%). Despite the quiet price action, there has been a slight increase in downward momentum. Today, we expect GBP to drift lower. Given the mild downward pressure, any decline is unlikely to break the support at 1.2710. On the upside, resistance levels are at 1.2780 and 1.2800.”
1-3 WEEKS VIEW: “We turned negative in GBP late last month (see annotations in the chart below). After GBP fell to 1.2674, in our most recent narrative from last Wednesday (07 Aug, spot at 1.2690), we indicated that ‘the rejuvenated momentum indicates that the risk remains on the downside, and the levels to watch are 1.2645 and 1.2610.’ GBP subsequently dropped to 1.2665 and then rebounded strongly, reaching a high of 1.2773 last Friday. While our 'strong resistance’ level at 1.2780 has not been breached yet, downward momentum has eased considerably, and the chance of GBP dropping below 1.2665 is low. To look at it another way, if GBP breaches 1.2780, it would suggest that GBP has entered a consolidation phase.”
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