GBP/USD still risks a deeper pullback as well as 1.2100 caps the upside, note Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group.

Key Quotes

24-hour view: “We highlighted last Friday that GBP ‘is likely to break 1.1960 but it is unlikely to threaten the next support at 1.1900’. Our view turned out to be correct as GBP dropped to 1.1915. However, we did not anticipate the sharp bounce from the low as GBP closed higher by 0.46% (1.2043). The sharp and rapid rebound in GBP has room to extend but any advance is viewed as part of a higher trading range of 1.1990/1.2075. In other words, a sustained rise above 1.2075 is unlikely.”

Next 1-3 weeks: “Last Friday (17 Feb, spot at 1.1985), we highlighted that ‘downward momentum has improved, albeit not much’. We added, ‘GBP is likely to break 1.1960 and the next support is at 1.1900’. GBP subsequently dropped close to 1.1900 (low of 1.1915) before rebounding strongly. With the strong rebound, downward momentum has waned, but as long as the ‘strong resistance’ at 1.2100 (level is unchanged from last Friday) is not breached within the next few days, there is still a slim chance for GBP to break below 1.1900.”