GBP/USD Weekly Outlook

GBP/USD continued to stay in recent established range of 1.6185/6617 last week and hence, outlook remains unchanged. The consolidative nature of price actions from 1.6617 argues that more upside would be seen. Break of 1.6617 will suggest rise from 1.5801 is resuming for 61.8% projection of 1.4395 to 1.6661 from 1.5801 at 1.7201. But in such case, upside momentum is expected to diminish as GBP/USD approaches this level and finally bring reversal. On the downside, below 1.6185 will flip intraday bias back to the downside for 1.5801 support instead and will revive the possibility that GBP/USD has already topped out.

In the bigger picture, rise from 1.3654 is treated as the third leg of the correction that started at 1.3503, which correct the larger down trend from 2.1161. Such rally from 1.3654 should be in the last stage after meeting target zone of 1.6428/7332 (38.2% and 50% retracement of 2.1161 to 1.3503). Focus will remain on reversal signal as we'd expect the whole correction from 1.3503 to conclude here. On the downside, firm break of 1.5801 support will now be an important signal that the whole correction has finally completed and will turn focus to next key support of 1.4984 for confirmation.

In the longer term picture, as discussed before, the corrective nature of the multi-decade advance from 1.0463 (85 low) to 2.1161 as well as the impulsive nature of the fall from there suggests that GBP/USD is now in an early stage of a long term down trend. Current rebound from 1.3503 is treated as a correction in the larger down trend only, rather than the start of a new up trend. Hence, the long term down trend is still expected to resume after completing such correction. However, sustained break of 50% retracement of 2.1161 to 1.3503 at 1.7332 will argue that the long term trend in GBP/USD is indeed already changed and we'll reassess the bullish potential in that case.

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