GBP/USD could still slip back towards the 1.2720 region in the near term, according to Markets Strategist Quek Ser Leang and Senior FX Strategist Peter Chia at UOB Group.

Key Quotes

24-hour view: We expected GBP to trade sideways in a range of 1.2795/1.2865 yesterday. Our view was incorrect, as GBP dropped to a low of 1.2742 before rebounding quickly. Downward pressure has eased with the rapid rebound, and the 1.2742 low could be a bottom for now. That said, it is too early to expect a major reversal. Today, GBP is likely to trade in a range, probably between 1.2755 and 1.2850. 

Next 1-3 weeks: Our most recent update was from last Friday (28 Jul, spot at 1.2800). In our update, we noted that “while downward momentum is building again, it remains to be seen if GBP can break the major support at 1.2720.” Yesterday, GBP dropped to 1.2742 before rebounding quickly. While there is no clear increase in momentum, there is still a chance for GBP to drop to 1.2720. All in all, we expect GBP to trade with a downward bias as long as it stays below 1.2880 (‘strong resistance’ level previously at 1.2900).