GBP/USD: Further losses seen below 1.1870 – UOB

In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, GBP/USD is expected to accelerate losses on a break below the 1.1870 level.

Key Quotes

24-hour view: “We highlighted last Friday that GBP ‘is likely to edge lower’ but we held the view that ‘the support at 1.1950 is unlikely to come under threat’. The anticipated decline exceeded our expectations as GBP cracked 1.1950 and dropped to 1.1928. Despite the decline, downward momentum has not increased much. That said, GBP is likely to weaken further even though a sustained decline below 1.1915 is unlikely (next support is at 1.1870). Resistance is at 1.1975, followed by 1.2000.”

Next 1-3 weeks: “Last Friday (24 Feb, spot at 1.2020), we highlighted that ‘downward momentum is showing signs of building but GBP has to break the major support at 1.1950 before a sustained decline is likely’. We did not quite expect the rapid increase in downward momentum as GBP cracked 1.1950 in NY trade and dropped to 1.1928. While the price actions suggest the risk for GBP is on the downside, it has to crack another major support at 1.1870 before it can continue to decline. The downside risk is intact as long as 1.2050 (‘strong resistance’ level was at 1.2105 last Friday) is not breached.”