24-hour view: Our view that GBP would trade in a range yesterday was incorrect. Instead of trading in a range, GBP plummeted to a low of 1.2680. While severely oversold, there appears to be enough momentum for GBP to dip below 1.2680. The major support at 1.2645 is likely out of reach today. In order to keep the momentum going, USD must stay below 1.2795 (minor resistance is at 1.2755). 

Next 1-3 weeks: Last Friday (28 Jul, spot at 1.2800), we noted that “while downward momentum is building again, it remains to be seen if GBP can break the major support at 1.2720.” After GBP dropped to 1.2742 and rebounded, we highlighted yesterday that “While there is no clear increase in momentum, there is still a chance for GBP to drop to 1.2720.” In early NY trade, GBP cracked 1.2720 and plummeted to 1.2680. Having breached the rather solid support at 1.2720, GBP is likely to weaken further. The next level to aim for is 1.2640, followed by another rather solid support at 1.2580. The downside risk is intact as long as GBP stays below 1.2830 (‘strong resistance’ level was at 1.2880).