Renewed downward momentum suggests Pound Sterling (GBP) could decline further to 1.3210, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Downward momentum suggests GBP to continue declining

24-HOUR VIEW: "We noted a 'firmer underlying tone' yesterday, and we were of the view that GBP 'is likely to trade in a higher range of 1.3320/1.3370'. While GBP subsequently edged higher to test 1.3370 (high was 1.3368), it staged a surprisingly sharp drop to a low of 1.3248. The decline appears excessive, but with no signs of stabilization 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. Resistance is at 1.3295; a breach of 1.3310 would indicate that the weakness is stabilizing."

1-3 WEEKS VIEW: "Last Friday (24 Oct, spot at 1.3325), we highlighted that 'for a continued decline, GBP must first close below 1.3295'. Our condition was not met, and yesterday (28 Oct, spot at 1.3340), we indicated that 'downward momentum is starting to fade, and the likelihood of a continued decline is diminishing'. We added, 'a breach of 1.3385 (‘strong resistance’ level) would indicate that GBP has likely moved into a range-trading phase'. We did not expect the subsequent sharp drop that reached a low of 1.3248. The renewed downward momentum suggests GBP could decline further to 1.3210. On the upside, the ‘strong resistance’ level is now at 1.3340 instead of 1.3385."