GBP/USD: Significant support level at 1.2300 can be out of reach – UOB Group

The Pound Sterling (GBP) is likely to decline; the significant support level at 1.2300 could be out of reach. In the longer run, risk has shifted to the downside but note that there is a significant support level at 1.2300, UOB Group’s FX analysts Quek Ser Leang and Lee Sue Ann note.

Risk has shifted to the downside

24-HOUR VIEW: “We did not expect GBP to plunge to a low of 1.2321 yesterday (we were expecting sideways trading). While the sharp and swift selloff seems overdone, the weakness in GBP has not stabilised. Today, as long as 1.2430 is not breached, with minor resistance at 1.2395, GBP is likely to decline. However, the significant support level at 1.2300 could be out of reach. Note that yesterday’s low, near 1.2320, is expected to provide support as well.”

1-3 WEEKS VIEW: “Our latest narrative was from two days ago (07 Jan, spot at 1.2510), wherein GBP ‘is expected to trade in a range between 1.2420 and 1.2620 for the time being.’ Yesterday, in a sudden move, GBP plunged, reaching a low of 1.2321. Although the increase in momentum has shifted the risk for GBP to the downside, note that October’s 2023 low is a significant support level. The downside risk will remain intact as long as GBP remains below 1.2465. Looking ahead, the next level to watch below 1.2300 is 1.2250.”