Pound Sterling (GBP) has moved into a range-trading phase; softening underlying tone suggests it is likely to test the lower end of the 1.3470/1.3650 range first, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

GBP/USD is likely to test the lower end of the 1.3470/1.3650 range

24-HOUR VIEW: "After GBP briefly rose to 1.3726 two days ago and then plummeted, we indicated yesterday that 'the brief rise did not result in any increase in upward momentum.' We were of the view that GBP 'is likely to range-trade between 1.3600 and 1.3665.' GBP subsequently edged up to 1.3661 and then plummeted to a low of 1.3534. While the sharp drop has scope to extend, the decline is quickly approaching oversold level, and any further downside is likely limited to a test of 1.3520. The next support at 1.3470 is unlikely to come into view. To keep the momentum, GBP must hold below 1.3600, with minor resistance at 1.3575."

1-3 WEEKS VIEW: "Two days ago (17 Sep, spot at 1.3655), we highlighted that 'there is room for further GBP gains toward 1.3700.' We also highlighted that 'the odds of an extended rise to 1.3765 are currently lower.' After GBP rose to 1.3726 and then pulled back sharply, we highlighted yesterday (18 Sep, spot at 1.3635) that 'there has been no further increase in upward momentum, and the odds of GBP rising to 1.3765 have diminished noticeably.' We pointed out that 'only a breach of 1.3575 (‘strong support’ level) would indicate that GBP has moved into a range-trading phase.' GBP then breached 1.3575, dropping to a low of 1.3534. GBP appears to have moved into a range-trading phase, but the softening underlying tone suggests it is likely to test the lower end of the 1.3470/1.3650 range first."