Despite oversold conditions, the Pound Sterling (GBP) could decline further; the likelihood of it reaching 1.3210 today is not high. In the longer run, to continue to weaken, GBP has to break the major support at 1.3210, UOB Group FX analysts Quek Ser Leang and Lee Sue Ann note.

GBP has to break below 1.3210 to continue falling

24-HOUR VIEW: “We did anticipate the sharp drop in GBP that sent it plummeting to a low of 1.3237. GBP then closed on a weak note at 1.3287, down by 0.67%. The sharp drop is severely oversold, but further decline is not ruled out. However, given the oversold conditions, the likelihood of GBP reaching the major support at 1.3210 today is not high (there is another support at 1.3235). On the upside, any rebound is likely to remain below 1.3330 with minor resistance at 1.3300.”

1-3 WEEKS VIEW: “Yesterday (01 Oct, spot at 1.3375), we indicated that “the current price movements are likely part of a range trading phase, probably between 1.3300 and 1.3430.” We certainly did not anticipate the sharp drop that sent GBP to a low of 1.3237. While the increase in momentum suggests GBP is likely to continue to weaken, it has to break the major support at 1.3210 before further sustained decline is likely. The chance of GBP breaking clearly below 1.3210 appears to be on the high side, provided that it remains below 1.3355.”