Severely oversold conditions suggest any further decline is likely to be limited to a test of 1.2695. The significant support at 1.2645 is unlikely to come into view today. While outsized decline seems to be overdone, further Pound Sterling (GBP) weakness is not ruled out, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.  

Immediate support is at 1.2695

24-HOUR VIEW: “We expected GBP to trade in a range yesterday. The sudden sharp lurch lower that sent it plunging by 0.94% (NY close 1.2735) was surprising. The outsized decline is the biggest 1-day drop in about four months. While the weakness has not stabilised, severely oversold conditions suggest any further decline is likely to be limited to a test of 1.2695. The significant support level at 1.2645 is unlikely to come into view today. Resistance is at 1.2765; a breach of 1.2795 would mean that the weakness in GBP has stabilised.”

1-3 WEEKS VIEW: “Last Friday (26 Jul, spot at 1.2855), we highlighted that ‘downward momentum is building, but at this time, it is premature to expect a significant decline.’ We held the view that GBP ‘is likely to trade with a downward bias towards 1.2780.’ GBP subsequently traded slightly lower. Yesterday (01 Aug, spot at 1.2855), we noted that ‘the buildup in momentum is beginning to ease, and if GBP breaks above 1.2895, it would indicate that the downward bias has faded.’ We did not anticipate the subsequent outsized drop, as GBP plunged below 1.2780, reaching a low of 1.2727. While the price action seems to be overdone, further GBP weakness is not ruled out. The next level to monitor is 1.2645. On the upside, the ‘strong resistance’ level has moved lower to 1.2840 from 1.2895.”