GBP/USD Weekly Outlook

GBP/USD's down trend from 2.1161 continued last week and dived to as low as 1.6786, taking out key medium term support at 1.7047 before recovering. From a short term angle, further decline is still expected as long as 1.7398 resistance holds. Below 1.6786 will indicate that recent fall has resumed for next target of 61.8% retracement of 1.3680 to 2.1161 at 1.6538. On the upside, however, above 1.3798 will indicate that a short term bottom is in place and bring stronger rebound.

In the bigger picture, a long term top is in place at 2.1161 and down trend from there is still in progress. Next medium term target is 61.8% retracement of 1.3680 to 2.1161 at 1.6538. 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. Sustained break of 1.6538 will target 1.3680 (01 low).

On the upside, however, above 1.7398 resistance will also be the first signal that fall from 1.8668 has completed. Further break of 1.7843 will add more credence to this case. Also, this will argue that the five wave decline from 2.1161 has completed too. In such case, medium term outlook in GBP/USD will be turned neutral and expect some consolidated between 1.6786 and 1.8668 before resuming the long term down trend. Nevertheless, upside of the consolidation should be limited by 1.8668 resistance.

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. Break of 1.7047 key support confirms that whole multi decade advance from 1.0463 (85 low) has already completed with three waves up to 2.1161. In other words, 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).

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