Downside risk appears to be building, but any Pound Sterling (GBP) weakness is likely part of a lower range of 1.3400/1.3535, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Downside risk appears to be building

24-HOUR VIEW: "Yesterday, when GBP was at 1.3460, we were of the view that it 'could test 1.3435'. We highlighted that “the major support at 1.3400 is not expected to come under threat'. While GBP subsequently broke below 1.3435, it rebounded from 1.3418 and closed at 1.3442, down by 0.11%. Downward momentum is starting to slow, but there is a chance for GBP to retest the 1.3420 level. The major support at 1.3400 is still unlikely to come under threat. On the upside, resistance levels are at 1.3460 and 1.3475."

1-3 WEEKS VIEW: "We highlighted yesterday (08 Jan, spot at 1.3460) that 'the downside risk appears to be building'. We also highlighted that 'any GBP weakness is likely part of a lower range of 1.3400/1.3535'. Our view remains unchanged. Looking ahead, if GBP breaks below 1.3400, it could trigger a more sustained decline."