British Pound: Downside pressure persists against US Dollar - UOB

UOB's Quek Ser Leang reports that the British Pound (GBP) has seen a bounce back against the US Dollar (USD), moving from 1.3479 to close at 1.3535 following an overshot decline. The analysis anticipates a short-term pause in price action between 1.3485 and 1.3540. On a one to three week timeline, a close under 1.3495 could signal a breach of 1.3475, while 1.3560 would limit upside potential. The broader market pullback could extend towards 1.3410.

On a 24-hour basis, GBP experienced a sharp drop to a low of 1.3493 last Thursday. Friday brought a note that "the sharp drop appears to be overdone, and instead of continuing to decline, GBP is more likely to consolidate between 1.3495 and 1.3535." However, subsequent price movements deviated from the expected pattern, with GBP initially falling to 1.3479 before rebounding to a high of 1.3535.

Given that this brief decline did not lead to heightened downward momentum, the outlook remains for GBP to consolidate, most likely between 1.3485 and 1.3540.

Looking ahead at a one to three week horizon, last Friday (11th September, spot at 1.3515) saw analysts noting "downward momentum is starting to build, and if GBP closes below 1.3495, it will then likely break the next support at 1.3475 as well." Indeed, GBP did drop to a low of 1.3479 before recovering to close 0.19% higher at 1.3535. There has been no further acceleration in the downward trend, but the view remains unchanged as long as GBP remains below 1.3560 (no change in 'strong resistance' level).