GBP/USD Weekly Outlook

Cable's down trend reaccelerated further to as low as 1.7537 last week. From a short term angle, initial bias remains on the downside this week as long as 1.7861 minor resistance holds this week. Further decline is expected to next target of 161.8% projection of 2.1161 to 1.9337 from 2.0158 at 1.7207. On the upside, above 1.7861 will indicate that an intraday low is in place and bring recovery to 4 hours 55 EMA (now at 1.8011) and above. But short term outlook will remain bearish as long as 1.8794 resistance holds.

In the bigger picture, medium term fall from 2.1161 (07 high) is still in progress and should be targeting next key support at 1.7047 first. On the upside, break of 1.8794 resistance will indicate that a short term bottom is finally formed and bring stronger rebound and longer consolidation. But upside should be limited well below 1.9337 support turned resistance and bring another fall.

In the longer term picture, last week's development further confirms that a long term reversal has happened at 2.1161 with monthly MACD turning negative and RSI diving into oversold region. The impulsive nature and the scale of the fall from 2.1161 also provides strong evidence to the case of the start of a long term down trend. Next downside target will be 61.8% retracement of 1.3680 to 2.1161 at 1.6538. Break of 2.0158 resistance is needed to invalidate this view.

Also, while it's still a bit early to draw a conclusion, one must be aware of the possibility that whole multi decade advance from 1.0463 (85 low) has already completed with three waves up to 2.1161. If this is the case, the current fall from 2.1161 is just the start of a long term down trend that should eventually bring cable through 1.3681 (01 low). The development for the rest of the year will be interesting.

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