In opinion of Peter Chia and Quek Ser Leang, FX Strategists at UOB Group, GBP/USD carries the potential to drop additional and revisit the 1.2250 area within the subsequent weeks.
24-hour view: “We highlighted yesterday that ‘the fast rise seems to be overdone’ however we have been of the view that GBP ‘may advance to 1.2660 first earlier than easing’. GBP subsequently rose to 1.2637 earlier than staging an abrupt sell-off that despatched it nose-diving to a low of 1.2325. Whereas deeply oversold, the weak spot in GBP has scope to increase to 1.2300 earlier than stabilization is probably going (the subsequent help at 1.2250 is unlikely to come back below risk). Resistance is at 1.2420 adopted by 1.2460.”
Subsequent 1-3 weeks: “We highlighted yesterday (05 Could, spot at 1.2620) that GBP has moved right into a consolidation section and is more likely to commerce inside a variety of 1.2520/1.2720. The next outsized decline of two.22% (largest 1-day drop since Mar 2020) got here as a shock. The fast and powerful build-up in momentum suggests GBP may weaken additional. The subsequent help is at 1.2250. On the upside, a breach of 1.2500 would point out that the present robust downward strain has eased.”