GBP/USD Weekly Outlook

Cable's break of 1.9599 support dampened our original short term bullish view and indicates that decline from 2.0391 has resumed. Subsequent fall pushed cable to as low as 1.9458 before recovering mildly. From a short term angle, further decline could still be seen to retest 1.9337 low. On the upside, above 1.9621 resistance will turn intraday outlook neutral first and stronger rebound could be seen to 4 hours 55 EMA (now at 1.9670) or above.

In the bigger picture, down trend from 2.1161 have made a low at 1.9337. Rebound from there should have completed with three waves up to 2.0391, which is corrective in nature. Subsequent fall form there also display a corrective structure too. In other words, wide range consolidation from 1.9337 is expected to extend further. Further current fall from 2.0391 will likely be contained by 1.9337 support and be followed by another rise to retest 2.0391 resistance or above before completing the consolidation. Break of 1.9772 resistance will be the first signal that the final rally of the consolidation has started.

In the longer term picture, prior break of medium term rising channel at least indicate that rise from 1.8090 has already completed at 2.1161, so is the medium term up trend from 1.7047 probably. Hence, sustained break of 2.1161 is needed to confirm the whole up trend has resumed. Otherwise, another fall is still expected towards 61.8% retracement of 1.7047 to 2.1161 at 1.8619 after finishing the current consolidation from 1.9337.

Also, while cable is still staying above 55 months EMA (now at 1.8727) as well as the long term trend line support (now at 1.8929) there is no indication of the completion of up trend from 1.3680 (01 low) yet. However, bearish divergence in monthly MACD and RSI suggests that 2.1161 is at least a medium term top and more downside is in favor in medium term even if the long term up trend will resume eventually.

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