Pound Sterling (GBP) could continue to decline despite oversold conditions, but it remains to be seen if it can reach 1.3245 today. In the longer run, the price action has resulted in a marked increase in downward momentum; the next technical target is at 1.3200, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Price action has resulted in a marked increase in downward momentum

24-HOUR VIEW: "We did not expect GBP to plunge to a low of 1.3280 yesterday (as we were expecting range-trading). The sharp decline is oversold, but strong downward momentum could continue to outweigh the oversold conditions. In other words, GBP could continue to weaken today. That said, it remains to be seen if it can reach 1.3245 today. Given the strong downward momentum, any recovery is likely to hold below 1.3370 (with minor resistance at 1.3330)."

1-3 WEEKS VIEW: "Two days ago (08 Oct, spot at 1.3425), we stated that GBP 'could edge lower, but it is unclear if it can reach 1.3325.' After GBP subsequently dropped to a low of 1.3372, we indicated yesterday (09 Oct, spot at 1.3400) that 'there has been no marked increase in downward momentum, but as long as GBP holds below the ‘strong resistance’ at 1.3465, the downside bias toward 1.3325 remains intact.' While our directional call was correct, we did not anticipate the speed of the decline, as GBP not only reached 1.3325, but also fell further to a low of 1.3280. This time around, the price action has resulted in a marked increase in downward momentum, and the next technical target is at 1.3200. On the upside, the ‘strong resistance’ level is now at 1.3410 instead of 1.3465."