In opinion of FX Strategists at UOB Group, Cable risks a potential move to the 1.2140 region in the next weeks.
24-hour view: “Instead of “continue to edge lower to 1.2260″, the decline in GBP yesterday exceeded our expectation as it not only cracked 1.2260 but the next support at 1.2235 as well (overnight low of 1.2196). The rapid drop appears to be running ahead of itself but with no sign of stabilization just yet, GBP could weaken further to 1.2170 (1.2195 as a minor support). On the upside, only a move back above 1.2270 would indicate the current weakness has stabilized (minor resistance is at 1.2250)”.
Next 1-3 weeks: “The sudden lurch lower and the ease by which GBP cracked the 01 Oct low of 1.2205 came a surprise (overnight low of 1.2195). The price action indicates that the sideway-trading phase that started last Friday (04 Oct, spot at 1.2335) ended sooner than expected. From here, GBP is expected to trade with a downward bias towards 1.2140. At this stage, it is too early to expect a sustained decline below this level (momentum is not as strong as preferred). All in, GBP is expected to stay under pressure unless it can move above the ‘strong resistance’ level of 1.2300″.