GBP/USD faces a major support at 1.2275 – UOB

Further downside in GBP/USD is likely to face a tough contention around 1.2275 according to Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “The sharp drop of -0.87% (1.2414) in GBP last Friday came as a surprise. While severely oversold, the decline could extend but a break of 1.2345 is unlikely (next support is at 1.2275). On the upside, a break of 1.2465 (minor resistance is at 1.2435) would indicate that the weakness in GBP has stabilized”.

Next 1-3 weeks: “Our view from last Friday (14 Apr, spot at 1.2525) wherein GBP ‘is likely to advance further to 1.2600’ was proven incorrect quickly as it plummeted below our ‘strong support’ level of 1.2440 before closing sharply lower by 0.87% (NY close of 1.2414). The 0.87% drop is the largest 10day drop in about five weeks. Despite the sharp drop, it is too early to expect a sustained decline in GBP. However, there is room for GBP to edge lower but any decline is unlikely to break clearly below the major support at 1.2275. The downside risk is intact as long as GBP stays below 1.2510 in the next few days”.