In the opinion of Economist Lee Sue Ann and Markets Strategist Quek Ser Leang at UOB Group, GBP/USD could see its losses accelerate to the 1.1850 region in the short term.

Key Quotes

24-hour view: “The sharp drop in GBP came as a surprise (we were expecting GBP to range-trade). The sharp and swift drop appears to be overdone, there is room for the weakness in GBP to extend to 1.1850 before stabilization is likely. The next support at 1.1800 is unlikely to come into view. Resistance is at 1.1950, but only a break of 1.1980 would indicate that the weakness has stabilized.”

Next 1-3 weeks: “We highlighted yesterday (05 Jan, spot at 1.2050) that GBP is likely to consolidate between 1.1900 and 1.2150 for the time being. We did not expect the subsequent sharp drop to 1.1873. The rapid build-up in momentum is likely to lead to further GBP weakness. Support levels are at 1.1850 and 1.1800. The downside risk is intact as long as GBP stays below the ‘strong resistance’ level, currently at 1.2020.”