24-hour view: After GBP plummeted to 1.2620 and rebounded, we indicated last Friday that “Downward momentum has slowed, and this combined with still overbought conditions, suggests GBP is unlikely to weaken further.” We expected GBP to trade sideways in a range of 1.2670/1.2770. GBP then dropped to 1.2689, soared to 1.2791 before ending the day at 1.2752 (+0.33%). The current price movements are likely part of a broad trading range. Today, we expect GBP to trade between 1.2700 and 1.2800.

Next 1-3 weeks: Last Thursday (03 Aug), GBP plummeted to 1.2620 and then rebounded strongly. In our update from last Friday (04 Aug, spot at 1.2715), we noted that “downward momentum has eased somewhat.” However, we indicated that “there is a chance for GBP to drop further to 1.2580.”. We continue to hold the same view. Overall, only a breach of 1.2830 (no change in ‘strong resistance’ level) would indicate that the GBP weakness from more than a week ago has stabilised.