Extra downside momentum could drag GBP/USD to a test of 1.1800 in the next weeks, comment FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, GBP dropped below last week’s low at 1.1877 (low of 1.1868) before rebounding. Downward momentum has improved, albeit not by much. While GBP could decline, any weakness could be limited to a test of 1.1850. The major support at 1.1800 is unlikely to come under threat. Resistance is at 1.1940 followed by 1.1970.”

Next 1-3 weeks: “In our latest narrative from last Friday (08 Jul, spot at 1.2025), we held the view that the recent GBP weakness has run its course and we expected GBP to consolidate and trade between 1.1900 and 1.2165. We did not expect the sharp drop to 1.1868 yesterday. Shorter-term downward momentum has improved, albeit not by much. From here, GBP is likely to trade with a downward bias towards 1.1800. At this stage, the odds for a sustained decline below 1.1800 are not high. Overall, only a break of 1.2010 (‘strong resistance’ level) would indicate that GBP is not ready to decline to 1.1800.”