24-hour view: While we expected GBP to weaken yesterday, we were of the view that “1.2265 is likely out of reach.” GBP fell more than expected to 1.2231 before snapping back up and then closed at 1.2295 (-0.39%). The sharp rebound in oversold conditions suggests that GBP is unlikely to weaken much further. Today, GBP is more likely to trade in a range, probably between 1.2240 and 1.2340. 

Next 1-3 weeks: Yesterday (21 Sep, spot at 1.2335), we indicated that “A break of 1.2305 will not be surprising.” We added, “As conditions are approaching oversold, it remains to be seen if 1.2265 will come into view.” However, GBP broke below 1.2265 and reached 1.2231 before rebounding. While the negative outlook that started early this month is still intact, the extended decline (both time- and price-wise) feels overstretched. In other words, the weakness may not have much room to go before stabilisation is likely. The next level to watch is 1.2200. On the upside, if GBP breaks above 1.2380 (‘strong resistance’ level was at 1.2420 yesterday), it would mean the weakness in GBP has stabilised.