GBP/USD Weekly Outlook

GBP/USD's sharp fall from 1.8668 last week at least confirmed that rebound from 1.7445 has completed. However, GBP/USD is still holding above 1.7445 and key long term fibonacci level of 50% retracement of 1.3680 to 2.1161 at 1.7421. From a short term angle, an intraday low is in place with 4 hours MACD staying above signal line. Initial bias is neutral this week with risk of further recovery to 1.7873 minor resistance and above. Though, upside should be limited by 1.8183 resistance and bring fall resumption. Below 1.7551 will indicate that fall from 1.8668 has resumed for 1.7421/55 support zone.

In the bigger picture, as mentioned before, the rebound from 1.7445, which is treated as correction to down trend from 2.1161, has completed after meeting target of 1.8512/8794 resistance zone and was limited below key near term resistance of 1.8794 (50% retracement of 2.0158 to 1.7445 at 1.8802). Medium term down trend is tentatively treated as resuming. Sustained break of 1.7421/45 support zone will confirm and bring fall to next target of 61.8% retracement of 1.3680 to 2.1161 at 1.6538 first.

However, above 1.8183 resistance will argue that medium term down trend is not ready to resume yet and further consolidation could be seen with risk of retesting 1.8868 high. Though, outlook will remain unchanged as long as 1.8794 cluster resistance holds. Fall from 2.1161 (07 high) is expected to develop into a five wave decline before making a medium term bottom. But firm break above 1.8794 will argue that a medium term bottom is already in place and bring larger scale consolidation.

In the longer term picture, recent development further confirms that long term reversal has happened at 2.1161. 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. 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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