24-hour view: We expected GBP to break below 1.2580 last Friday, but we indicated that “it remains to be seen if it can maintain a foothold below this level.” We also indicated that “the next support is at 1.2530.”. In line with our expectations, GBP broke below 1.2580 as it dropped to 1.2548 before ending the day at 1.2577 (-0.19%). Downward momentum has not increased much; this combined with oversold conditions, suggests that GBP is unlikely to weaken much further. Today, GBP is more likely to trade sideways, probably in a range of 1.2545/1.2625.

Next 1-3 weeks: Our update from last Friday (25 Aug, spot at 1.2600) still stands. As highlighted, the increase in downward momentum suggests GBP is likely to weaken to 1.2530, possibly 1.2480. We will continue to hold the same view as long GBP stays below the ‘strong resistance’ at 1.2685 (level was at 1.2720 last Friday).