Further downside momentum could drag cable to the mid-1.2200s in the near term, suggested UOB Group’s FX Strategists Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “We highlighted last Friday that ‘the oversold weakness in GBP has scope to extend to 1.2300 before stabilization is likely’. We added, ‘the next support at 1.2250 is unlikely to come under threat’. GBP subsequently dropped to 1.2276 before rebounding. The weakness in GBP appears to have stabilized somewhat and this coupled with oversold conditions suggests that GBP is unlikely to weaken much further. For today, GBP is more likely to trade between 1.2270 and 1.2370.”

Next 1-3 weeks: “Last Friday (06 May, spot at 1.2370), we highlighted that the rapid and strong build-up in momentum suggests GBP could weaken further. We added, ‘the next support is at 1.2250’. GBP subsequently dropped to 1.2276. Further weakness still appears likely even though oversold shorter-term conditions could lead to a couple of days of consolidation first. Looking ahead, the next support below 1.2250 is at 1.2200. On the upside, a breach of 1.2450 (‘strong resistance’ level was at 1.2500 last Friday) would indicate that the current downward pressure has eased.”