GBP/USD risks a deeper pullback once 1.2345 is cleared, according to Economist at UOB Group Lee Sue Ann and Markets Strategist Quek Ser Leang.

Key Quotes

24-hour view: “Yesterday, we indicated that GBP ‘could rise above 1.2510 but it might not be able to break clearly above the month-to-date high of 1.2545’. However, instead of rising above 1.2510, GBP plummeted from 1.2507 to a low of 1.2388. The sharp and rapid decline appears to be running ahead of itself but with no signs of stabilization just yet, GBP could drop further. In view of the oversold conditions, the major support at 1.2345 is unlikely to come under threat (there is another support at 1.2375). On the upside, a break of 1.2460 (minor resistance is at 1.2435) would indicate that the weakness in GBP has stabilized.”

Next 1-3 weeks: “Our view from yesterday (25 Apr, spot at 1.2485) wherein ‘a break of 1.2510 will not be surprising and will increase the odds for further GBP strength’ was invalidated quickly as GBP plunged and took out our ‘strong support’ level of 1.2415 (low of 1.2388). While the downward risk is beginning to build, GBP has to break and stay below 1.2345 before a sustained decline is likely. The chance of GBP breaking clearly below 1.2345 will increase as long as it stays below 1.2490 in the next few days.”