24-hour view: We highlighted yesterday that GBP “could rise to 1.2975 before the risk of a pullback increases”. We added, “The major resistance at 1.3000 is still unlikely to come into view.” While 1.3000 did not come into view, we did not anticipate the outsized selloff from 1.2995 (GBP plunged to a 1.2782 in NY trade). Further GBP weakness is not ruled out. However, the major support at 1.2720 is likely out of reach today. Resistance is at 1.2835, followed by 1.2870. 

Next 1-3 weeks: Two days ago (26 Jul, spot at 1.2895), we highlighted that “downward pressure has faded”, and we expected GBP to trade in a range between 1.2800 and 1.3100. Yesterday, GBP plunged and took out the support at 1.2800 (low was 1.2782). Downward momentum is building again, but after the outsized drop yesterday, it remains to be seen if GBP can break the major support at 1.2720. All in all, we expect GBP to trade with a downward bias as long as it stays below 1.2930 (‘strong resistance’ level).