British Pound: Oversold Sterling still seen weaker against US Dollar – UOB

United Overseas Bank (UOB) strategists Quek Ser Leang and Lee Sue Ann report that the British Pound (GBP) has shown signs of being oversold, with GBP/USD plunging to 1.3375 and closing at 1.3380. They believe this drop is excessive but anticipate further downside. Intraday, they see the possibility of testing the 1.3350 level while holding above 1.3300.

Over the next three weeks, they expect continued weakness toward 1.3350, with a potential extension to 1.3300 if resistance at 1.3460 caps rebounds. In the 24-hour view, GBP traded within a narrow range of 1.3465/1.3501. When it reached 1.3480 earlier, they suggested a slight increase in downward momentum, but they held the view that major support at 1.3410 was unlikely to be tested.

However, the pound plunged to a low of 1.3375, exceeding expectations. They do not anticipate the next support at 1.3300 to materialize soon. On the upside, any recovery should stay below 1.3435, with minor resistance at 1.3410. They have maintained a negative view on GBP since last Friday, anticipating further weakness. In the most recent narrative (two days ago), they noted that "the price action points to further GBP weakness," but indicated that "the next major support at 1.3410 may not come into view so soon."

An abrupt move during the New York session yesterday saw GBP break below 1.3410, plummeting to 1.3375. While a break below this level is not ruled out, the magnitude of the drop suggests that GBP may still be oversold, and it remains unclear whether it has enough momentum to reach the next technical target at 1.3300. They will continue to hold a negative view as long as GBP remains below the "strong resistance" level at 1.3460.