In the opinion of FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang, a drop below 1.1800 in GBP/USD remains likely in the short term.

Key Quotes

24-hour view: “We expected GBP to decline yesterday but we were of the view that ‘any weakness could be limited to a test of 1.1850’. We indicated, ‘the major support at 1.1800 is unlikely to come under threat’. The anticipated weakness exceeded our expectations as GBP plummeted to a low of 1.1808 before rebounding to end the day little changed at 1.1885 (-0.08%). The rebound amidst oversold conditions suggests that GBP is unlikely to weaken further. For today, GBP is more likely to trade between 1.1825 and 1.1925.”

Next 1-3 weeks: “We turned negative GBP yesterday (12 Jul, spot at 1.1910) and indicated that GBP could trade with a downward bias towards 1.1800. Our view for a weaker GBP was not wrong but we did not expect GBP to approach 1.1800 so quickly (GBP dropped to 1.1808 during London hours). While downward momentum has not improved by much, the chance for GBP to break 1.1800 has increased. A break of 1.1800 would shift the focus to 1.1750. The downside risk is intact as long as GBP does not move above 1.1980 (‘strong resistance’ level was at 1.2010 yesterday).”