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In light of recent price action, Cable carries the potential to drop further and test the 1.2200 neighbourhood in the near term.

Key Quotes

24-hour view: “Instead of “trading sideways”, GBP dropped and ended the lower at 1.2287 (-0.28%). The decline appears to be over-extended but it is too soon to expect a recovery. From here, barring a move above 1.2345 (minor resistance is at 1.2325), GBP could grind lower even though the major 1.2250 level could be just out of reach (minor support is at 1.2270)”.

Next 1-3 weeks: “GBP extended its decline and the 1.2250 level that was first indicated last Thursday (26 Sep, spot at 1.2360) appears to be within reach soon (Friday’s low of 1.2270). While the decline from the 1.2582 peak appears to be running ahead of itself, a clear break of 1.2250 could lead to further GBP weakness to 1.2205. On the upside, only a break 1.2390 (‘strong resistance’ level previously at 1.2420) would indicate that the current downward pressure in GBP has eased”.