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In view of FX Strategists at UOB Group, GBP/USD could extend the drop to the mid-1.12300s on a close below 1.2440.

Key Quotes

24-hour view: “Expectation for GBP to trade sideways was incorrect as it resumed its recent weakness and dropped to an overnight low 1.2439. Despite the bounce from the low, it is too early to expect a sustained recovery. From here, GBP could edge below the overnight low but the year-to-date low at 1.2409 is likely out of reach for today (there is another support at 1.2425). On the upside, GBP has to move back above 1.2495 in order to indicate that the recent weakness has stabilized (next resistance is at 1.2520)”.

Next 1-3 weeks: “The relatively strong decline in GBP yesterday that tested the minor support at 1.2440 was not exactly expected (low of 1.2439). Our view from Monday (08 Jul, spot at 1.2645) was that while GBP is “under pressure”, the “the odds for a fresh year-to-date low are not high”. Shorter-term indicators are oversold and from here, we prefer to wait for a NY close below 1.2440 before adopting a more negative stance. Looking ahead, if GBP were to close below 1.2440 in NY, it would indicate that it could weaken further to 1. 2350. All in, the downward pressure in GBP is deemed as intact until it can move above 1.2550 (strong resistance was at 1.2590 yesterday)”.