24-hour view: We did not anticipate the sharp selloff that sent GBP plummeting to a low of 1.2591 (we were expecting it to trade sideways). Unsurprisingly, downward momentum is strong. That said, conditions are severely oversold. Today, GBP is likely to break below 1.2580, but it remains to be seen if it can maintain a foothold below this level. The next support is at 1.2530. In order to keep the momentum going, GBP must stay below 1.2675 (minor resistance is at 1.2640).   

Next 1-3 weeks: After GBP dropped sharply to 1.2615, and then rebounded strongly, we highlighted yesterday (24 Aug, spot at 1.2720) that “there is no increase in momentum, and we continue to expect GBP to trade sideways, albeit in a lower range of 1.2580/1.2780.” We did not expect GBP to plummet to a low of 1.2591 in NY trade, This time around, there is a clear increase in momentum. From here, as long as GBP stays below the ‘strong resistance’ level, currently at 1.2720, it is likely to weaken to 1.2530, possibly 1.2480.