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In opinion of FX Strategists at UOB Group, Cable could extend the leg lower to the 1.2800 zone if 1.2840 is cleared.

Key Quotes

24-hour view: “We highlighted yesterday the weakness in GBP ‘is likely aiming for the month-to-date low of 1.2873’ but held the view that the ‘next support at 1.2840 is unlikely to come into the picture’. Our expectation was not wrong as GBP dropped to an overnight low of 1.2849 before staging a mild recovery to end the day at 1.2879. While downward momentum has eased somewhat, there is room for GBP to test 1.2840 before a more sustained recovery can be expected (next support at 1.2800 is not likely to come into the picture). On the upside, a break of 1.2925 would indicate the current downward pressure has eased (minor resistance is at 1.2905).”

Next 1-3 weeks: “As highlighted, GBP is under mild downward pressure and could edge lower to 1.2840. GBP subsequently dropped to a low of 1.2849. The pace of the decline is faster than anticipated and from here, a break of 1.2840 would lead to further weakness to 1.2800 (we held the view yesterday that 1.2800 is likely out of reach). All in, GBP is expected to trade on the back foot unless it can move above 1.2960 (‘strong resistance’ level was at 1.3020 yesterday).”