24-hour view: We expected GBP to trade in a range between 1.2100 and 1.2170 last Friday. Our view of range trading was not wrong, even though it traded in a narrower range than anticipated (1.2106/1.2163). GBP then closed largely unchanged at 1.2123 (-0.04%). The consolidative price action suggests further range trading today, albeit likely in a lower range of 1.2085/1.2155. 

Next 1-3 weeks: Last Thursday (26 Oct, spot at 1.2105), we highlighted that downward momentum is beginning to improve, and we were of the view that GBP is likely to test the early October near 1.2040. While GBP has not been able to make much headway on the downside and downward momentum has waned somewhat, there is still room for GBP to test 1.2040. Overall, only a breach of 1.2180 (‘strong resistance’ level previously at 1.2200) would indicate that the current downward pressure has faded.