24-hour view: After GBP dropped to a low of 1.2111 on Wednesday, we indicated yesterday that “while the weakness in GBP has not really stabilised, downward momentum is showing tentative signs of slowing.” We held the view that, “there is room for GBP to test 1.2100, but a clear break below this level is unlikely.” Not only did GBP not test 1.2100, it also rebounded strongly and posted its largest 1-day gain in a month (1.2202, +0.55%). The strong rebound could extend to 1.2250 before levelling off. The next resistance at 1.2300 is unlikely to come under threat. Support is at 1.2170, followed by 1.2145.  

Next 1-3 weeks: Yesterday, GBP rebounded strongly and took out our ‘strong resistance’ level of 1.2220. The breach of the ‘strong resistance’ level means that the GBP weakness that started early this month has finally ended. The current price movement is likely the early stages of a consolidation phase. In view of the sharp drop over the past month, GBP could consolidate in a relatively broad range of 1.2100/1.2380 for the time being.