The Pound Sterling (GBP) could dip towards 1.2600 before the risk of a rebound increases, UOB Group strategists note.

A clear break below 1.2600 is unlikely

24-HOUR VIEW: “We indicated last Friday that GBP could break below the major support at 1.2650. However, we were of the view that ‘the next major support at 1.2600 is highly unlikely to come under threat.’ In line with our expectations, GBP dropped below 1.2650, reaching a low of 1.2622. Conditions are oversold, but GBP could dip towards 1.2600 before the risk of a rebound increases. A clear break below 1.2600 is unlikely. Resistance levels are at 1.2655 and 1.2670.”

1-3 WEEKS VIEW: “We highlighted last Friday (21 Jun, spot at 1.2660) that ‘the weakness in GBP is not showing any sign of stabilisation just yet.’ We added, ‘if it breaks and stays below 1.2650, it could continue to weaken to 1.2600.’ GBP subsequently dropped to a of low of 1.2622. From here, we expect GBP to continue to weaken to 1.2600. Only a breach of 1.2705 (‘strong resistance’ level previously at 1.2730) would mean that the weakness in GBP has stabilised.”

GBP/USD: A BREACH BELOW 1.2705 TO STABILIZE STERLING’S WEAKNESS – UOB GROUP