GBP/USD risks a deeper pullback – UOB

According to UOB Group’s Economist Lee Sue Ann and Markets Strategist Quek Ser Leang, GBP/USD should meet a tough support around 1.2120 in the next few weeks.

Key Quotes

24-hour view: “Our view for the ‘advance in GBP to extend’ was incorrect as it plummeted to 1.2222 before closing on a weak note at 1.2225 (-1.22%). Strong downward momentum suggests further GBP weakness even though the major support at 1.2120 is unlikely to come under threat today (minor support is at 1.2160). On the upside, a breach of 1.2290 (minor resistance is at 1.2260) would indicate the weakness in GBP has stabilized.”

Next 1-3 weeks: “Yesterday (02 Feb, spot at 1.2385), we highlighted that while upward momentum is beginning to build, GBP must break and stay above 1.2450 before a sustained advance is likely. However, GBP plummeted and quickly took out our ‘strong support’ level at 1.2300. The rapid increase in momentum has shifted the risk to the downside but any decline is expected to face solid support at 1.2130. Overall, only a breach of 1.2320 would indicate that the rapid increase in downward momentum has faded.”