Pullback has scope to extend; the major support at 1.3390 is unlikely to come under threat. In the longer run, GBP is likely in a range-trading phase between 1.3390 and 1.3520, UOB Group's FX analysts Quek Ser Leang and Peter Chia note.

Pullback has scope to extend

24-HOUR VIEW: "Following the sharp rebound in GBP that reached a high of 1.3486 two days ago, we indicated yesterday that 'the sharp rebound has scope to test 1.3495 before a pullback can be expected'. We pointed out that 'the major resistance at 1.3520 is not expected to come under threat'. Our view turned out to be correct, as GBP rose to 1.3495 and then pulled back sharply to a low of 1.3422. This time around, the pullback has scope to extend, but the major support at 1.3390 is unlikely to come under threat. Note that there is another support level at 1.3410. Resistance is at 1.3450; a breach of 1.3470 would indicate that the current downward pressure has eased."

1-3 WEEKS VIEW: "Our update from yesterday (13 Jan, spot at 1.3465) remains valid. As highlighted, the recent price action suggests that GBP 'is likely in a range-trading phase, probably between 1.3390 and 1.3520'. While we continue to hold the same view, following the pullback in the NY session, the risk of GBP breaking below 1.3390 has increased."