24-hour view: We highlighted last Friday that GBP “is likely to continue to weaken.” We also highlighted that “severely oversold conditions suggest a sustained break below 1.2355 is unlikely.” GBP weakened less than expected as it dropped to 1.2380 before settling at 1.2383 (-0.23%). Conditions remain oversold, but with no signs of stabilisation just yet, GBP could dip to 1.2355 before the risk of a more sustained rebound increases. The major support at 1.2305 is highly unlikely to come into view. Resistance is at 1.2420, followed by 1.2445. 

Next 1-3 weeks: Our update from last Friday (15 Sep, spot at 1.2405) is still valid. As highlighted, the weakness in GBP that started about two weeks ago (see annotations in the chart below) has not stabilised, and GBP could continue to weaken. The next level to watch is May’s low near 1.2305. On the upside, a breach of the ‘strong resistance’ level at 1.2485 (no change in level from last Friday) would mean that 1.2305 is out of reach this time around.