United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann report GBP/USD plunged to 1.3375 and closed at 1.3380, a move seen as excessive but still pointing to further downside. Intraday, they see scope for a test of 1.3350 while holding above 1.3300, and over 1-3 weeks expect continued weakness toward 1.3350 with possible extension to 1.3300 as long as resistance at 1.3460 caps rebounds.

Sterling weakness targets 1.3350 support

“24-HOUR VIEW: GBP traded within a relatively narrow range of 1.3465/1.3501 two days ago. When it was at 1.3480 in the early Asian session yesterday, we indicated that “the slight increase in downward momentum suggests GBP could edge lower and test 1.3450.” However, we held the view that “the major support at 1.3410 is unlikely to come into view.” We were right on the first count, but not the second, as GBP plunged to a low of 1.3375. The sharp decline appears excessive, but there is a chance for GBP to test 1.3350 before stabilisation is can be expected. We do not expect the next support at 1.3300 to come into view. On the upside, any recovery should hold below 1.3435, with minor resistance at 1.3410.”

“1-3 WEEKS VIEW: We have been holding a negative GBP view since last Friday. In our most recent narrative from two days ago (15 Sep, spot at 1.3500), we highlighted that “the price action points to further GBP weakness” However, we indicated that “the next major support at 1.3410 may not come into view so soon.” In an abrupt move during the NY session yesterday, GBP broke below 1.3410 as it plummeted to a low of 1.3375. The price action continues to suggest further GBP weakness, likely toward 1.3350. A break below this level is not ruled out, but given the deeply oversold short-term conditions, it remains to be seen whether GBP has sufficient momentum to reach the next technical target at 1.3300. We will maintain our negative view as long as GBP holds below the ‘strong resistance’ at 1.3460 (level was at 1.3540 yesterday).”