GBP/USD keeps looking at 1.2100 – UOB

Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group note GBP/USD could weaken further and revisit the 1.2100 region.

Key Quotes

24-hour view: Yesterday, we held the view that “further GBP weakness is not ruled out, but subdued downward momentum suggests the major support at 1.2100 is likely out of reach.” Our view turned out to be correct as GBP dropped to a low of 1.2111 before settling at 1.2135 (-0.19%). While the weakness in GBP has not really stabilised, downward momentum is showing tentative signs of slowing. Today, there is room for GBP to test 1.2100, but a clear break below this level is unlikely. Resistance is at 1.2160; if GBP breaks above 1.2190, it would mean that the weakness in GBP has stabilised.

Next 1-3 weeks: There is not much to add to our update from two days ago (26 Sep, spot at 1.2215). As highlighted, the GBP weakness that started early this month (see annotations in the chart below) is still in place. GBP could continue to weaken, and the next level to watch is 1.2100. The weakness in GBP will remain intact as long as it stays below 1.2220 (‘strong resistance’ level previously at 1.2245). Looking ahead, if GBP breaks clearly below 1.2100, there is room for it to drop further to 1.2050 before the risk of a recovery increases.