24-hour view: After rising briefly to a high of 1.2712 last Friday, it plunged to a low of 1.2578 before closing on a weak note at 1.2590 (-0.65%). Unsurprisingly, the sharp drop has resulted in an increase in downward momentum. Today, GBP is likely to weaken further, but oversold conditions suggest it might not be able to break clearly below 1.2545 (next support is at 1.2500). Resistance is at 1.2620, followed by 1.2645.  

Next 1-3 weeks: In our most recent narrative from last Thursday (31 Aug, spot at 1.2715), we held the view that “there is a chance for GBP to rise to 1.2800, with a lower possibility of reaching 1.2845.” Our view was invalidated quickly, as GBP plunged on Friday and took out our ‘strong support’ level at 1.2630. The risk appears to have shifted to the downside. However, as downward momentum is only beginning to build, any weakness is likely to face solid support at 1.2500 (there is another strong support at 1.2545). Resistance-wise, if GBP breaks above 1.2680, it would mean that the buildup in momentum has faded.