Downward momentum has slowed further; there is a low of confidence in a sustained break below 1.2710, UOB Group FX strategists Quek Ser Leang and Lee Sue Ann note.

May test 1.2710 in short term

24-HOUR VIEW: “Two days ago, GBP soared to a high of 1.2840. Yesterday, we indicated that ‘the rapid rise appears to be overdone, and instead of continuing to rise, GBP is more likely to trade in a range between 1.2740 and 1.2840.’ However, in London trade, GBP fell briefly to 1.2710, rebounded to 1.2817, and then traded sideways for the rest of the session. Further sideways trading seems likely today, expected to be in a range of 1.2745/1.2840.”

1-3 WEEKS VIEW: “We have held a negative view in GBP since 26 Jul, when it was trading at 1.2855. After GBP plummeted to 1.2709 and rebounded strongly last Friday, we indicated yesterday (05 Aug, spot at 1.2785) that ‘downward momentum has slowed, and any further GBP weakness is likely limited to a retest of the 1.2710 level.’ In London trade, GBP dropped to 1.2710 and then rebounded again. Momentum continues to slow, and we do not have high confidence of a sustained decline below 1.2710. On the upside, if GBP breaks above 1.2840 (no change in ‘strong resistance’ level), it would mean that GBP is not weakening further.”