Pound Sterling (GBP) is likely to consolidate between 1.3140 and 1.3245. In the longer run, GBP is still negative, but it remains to be seen if 1.3100 is within reach during this phase of weakness, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

GBP is still negative on the day

24-HOUR VIEW: "Two days ago, GBP dropped sharply to a low of 1.3248. Yesterday, when GBP was at 1.3270, we indicated the following: 'The decline appears excessive, but with no signs of stabilisation just yet, there is a chance for GBP to test 1.3240. Given the oversold conditions, a sustained drop below this level appears unlikely. The next support at 1.3210 is also unlikely to come into view.' However, downward momentum was stronger than we expected, as GBP dropped sharply for the second straight day, reaching a low of 1.3142. GBP rebounded from the low to close at 1.3196 (-0.57%). The rebound from oversold conditions suggests that GBP is unlikely to weaken much further. Today, GBP is more likely to consolidate between 1.3140 and 1.3245."

1-3 WEEKS VIEW: "Yesterday (29 Oct, spot at 1.3270), we highlighted that 'renewed downward momentum suggests GBP could decline further to 1.3210.' We did not expect GBP to break 1.3210 so soon, as it plummeted to a low of 1.3142. Although the weakness in GBP that started in the middle of last week remains intact, conditions are deeply oversold. It is also worth noting that the 1.3140 level was tested in August but held. While we are holding on to our negative view, it remains to be seen if the next technical target at 1.3100 is within reach during this phase of weakness. On the upside, if GBP breaks above 1.3285 (‘strong resistance’ level was at 1.3340 yesterday), it would mean that the weakness is stabilising."