In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, further weakness is still favoured in GBP/USD in the next weeks.

Key Quotes

24-hour view: “While we highlighted yesterday that GBP ‘is still weak and is likely to drop below 1.1580’, we indicated, ‘oversold conditions suggest 1.1530 could be out of reach’. GBP subsequently dropped below 1.1580 but held above 1.1530 until NY session when it plunged sharply but briefly to 1.1499 before bouncing. Despite the bounce from the low, the risk for today is still on the downside. That said, any decline in GBP may not be able to maintain a foothold below 1.1500 (note that conditions are still deeply oversold). The next support is at 1.1460.On the upside, a break of 1.1605 (minor resistance is at 1.1570) would indicate that the weakness in GBP has stabilized.”

Next 1-3 weeks: “We turned negative GBP at the start of the week. As GBP plummeted, in our latest narrative from yesterday (01 Sep, spot at 1.1610), we indicated that the downside risk in GBP remains intact. We highlighted that a break of 1.1580 would shift the focus to 1.1530. While our view was correct, we did not expect the sharp but short-lived plunge to 1.1499 during NY session. Further weakness is likely and the level to focus on is at the Mar 2020 low near 1.1415. That said, shorter-term conditions are deeply oversold and it is left to be seen if this major support is within reach this time round. Overall, only a break of 1.1635 (‘strong resistance’ level was at 1.1700 yesterday) would indicate that GBP is not weakening further.”