Further downside in GBP/USD is expected to meet decent contention at 1.2025 ahead of the psychological 1.2000 handle, suggested FX Strategists at UOB Group.
24-hour view: “GBP had a lackluster session on Tue, confined in a narrower than expected 1.2042/1.2097 range. Directional wise, GBP may slide further today although strong support is expected at 1.2025 and further losses below its psychological support at 1.2000 is unlikely today. On the topside, resistance is expected at 1.2100 and only a move above 1.2125 would indicate that downside pressures have eased”.
Next 1-3 weeks: “The downward acceleration over the past couple of days could be attributed to the lack of significant support levels. From here, if GBP were to crack 1.2110, it could lead to further steep decline as the next support is more than 100 pips lower at 1.1985. That said, 1.1985 is just a minor low in Jan 2017 (on the weekly chart) and it is left to be seen how much support it can offer (if GBP were to move to this level). Below this level, the more significant support would be the Oct 2016 ‘flash crash’ low of 1.1491. All in, despite being oversold, the current weakness in GBP is not showing sign of stabilizing just yet. Only a break of the 1.2195 ‘key resistance’ (level was at 1.2220 yesterday) would suggest that the decline in GBP is ready to take a breather”.