GBP/USD could still drop further in the next weeks, suggest FX Strategists at UOB Group Lee Sue Ann and Quek Ser Leang.

Key Quotes

24-hour view: “While we expected GBP to weaken last Friday, we highlighted that ‘it is left to be seen if GBP can break the solid support at 1.1400 today’. However, GBP easily took out 1.1400 as it plummeted to 1.1351 before bouncing back to end the day at 1.1422 (-0.44%). The rebound amidst oversold conditions and waning downward momentum suggests GBP is unlikely to weaken further. For today, GBP is more likely to consolidate within a range of 1.1380/1.1480.”

Next 1-3 weeks: “We turned negative on GBP last Wednesday (14 Sep, spot at 1.1510). As GBP declined, in our latest narrative from last Friday, we indicated that the risk of a break of the major support 1.1400 has increased. We added, “a break of the solid support could potentially trigger a rapid sell-off as there is no significant support until 1.1300”. GBP subsequently took out 1.1400, plummeted to 1.1351 before rebounding. There is no change in our view for now even though oversold shorter-term conditions could lead to 1 to 2 days of consolidation first. All in, the downside risk is intact as long as GBP does not move above 1.1540 (‘strong resistance’ level was at 1.1590 last Friday).”