In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, GBP/USD risks a deeper pullback on a breach of the 1.2000 yardstick.

Key Quotes

24-hour view: “We did not expect the sharp drop in GBP to 1.2004 last Friday and the subsequent strong rebound from the low. Despite the strong rebound, the immediate pressure is still on the downside. While there is room for GBP to weaken, a break of the major support at 1.2000 is unlikely (minor support is at 1.2025). On the upside, a breach of 1.2115 (minor resistance is at 1.2085) would indicate that the current downward pressure has eased.”

Next 1-3 weeks: “Our latest narrative was from Wednesday (03 Aug, spot at 1.2160) where GBP is in a consolidation phase and is likely to trade within a range of 1.2040/1.2255. On Friday (05 Aug), GBP cracked 1.2040 and dropped to 1.2004. Shorter-term downward momentum is beginning to improve and the risk for GBP is tilted to the downside. That said, GBP has to crack the major support at 1.2000 before a sustained decline is likely. Overall, only a break of 1.2155 (‘strong resistance’ level) would indicate that the downside risk has dissipated.”