Extra decline in GBP/USD remains well on the cards for the time being, note Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: “We highlighted yesterday that ‘the oversold decline has scope to dip below 1.2000 before stabilization is likely.’ Our view did not materialize as GBP dipped to 1.2006 before recovering slightly to close at 1.2022 (-0.22%). While we still see room for GBP to move below 1.2000, any weakness is viewed as part of a lower trading range of 1.1980/1.2060. In other words, we do not expect a sustained decline below 1.1980.”

Next 1-3 weeks: “There is not much to add to our update from yesterday (06 Feb, spot at 1.2050). As highlighted, further increase in downward momentum suggests more GBP weakness but it remains to be seen if the significant support at 1.1845 will come into view. Overall, only a breach of 1.2150 (‘strong resistance’ level was at 1.2200 yesterday) would indicate that the weakness that started late last week has run its course.”