Insights 
VT 
The Pound Sterling (GBP) could continue its decline against the US Dollar (USD) despite being in oversold conditions. It remains uncertain if it will reach the 1.3245 level today, as downward momentum has increased, with a technical target set at 1.3200.
Analysts suggest that GBP may keep weakening due to strong downward momentum, even though conditions appear oversold. The likelihood of recovery appears limited, with a potential cap at 1.3370, and minor resistance expected at 1.3330.
Currency Market Trends
In the previous days, GBP dropped faster than initially projected. It surpassed the anticipated fall to 1.3325, swiftly declining to 1.3280, thus intensifying downward momentum. The next focus is a technical target at 1.3200, with the strong resistance level now adjusted to 1.3410 from the earlier 1.3465.
This analysis reflects observations from market experts, including both commercial notes and insights from external analysts, focused on emerging trends within the currency market.
The sharp drop in the Pound is creating significant downward momentum, suggesting more weakness ahead. This view is supported by the latest UK economic data, which showed Q3 GDP growth at a stagnant 0.1% and inflation remaining stubbornly high at 3.2%. Meanwhile, the most recent US jobs report from last week revealed a robust 230,000 new jobs, reinforcing the dollar’s strength.
Approach for Traders
For traders, this points toward strategies that profit from a further decline in GBP/USD. We see buying put options with strike prices near the 1.3200 target as a clear way to position for this move. Selling GBP/USD futures contracts is another direct approach, taking advantage of the strong downward trend.
Despite the currency being technically oversold, the momentum suggests any rallies will be short-lived. We should consider the 1.3410 level as a key resistance point to place stop-losses on short positions. This level now acts as a ceiling, and a break above it would signal that the immediate downward pressure has faded.
We must remember the extreme volatility the Pound has shown in the past, such as the sharp declines seen during the 2022 fiscal announcements. This historical precedent shows that even from oversold levels, significant and rapid drops are possible when momentum is strong. Therefore, fighting this current trend could be a costly mistake.
