GBP/USD Weekly Outlook

GBP/USD dropped further to as low as 1.5371 last week but drew support from 55 days EMA and turned sideway. Initial bias remains neutral this week and some more consolidations could be seen first. But upside is expected to be limited by 1.5701 resistance and bring fall resumption. Below 1.5371 will target 1.5123 cluster support (50% retracement of 1.4230 to 1.5997 at 1.5114). Decisive break there will confirm our bearish view that rise from 1.4230 has finished at 1.5997 already and will target a retest on this low. However, break of 1.5701 will dampen this bearish view and turn bias back to the upside for a test on 1.5997 high.

In the bigger picture, price actions from 1.3503 are viewed as consolidation to fall from 2.1161 only with rise from 1.4230 as the third leg. In any case, a break of 1.4230 support will indicate that the consolidation is completed and down trend from 2.1161 is resuming for another low below 1.3503. In case of another rise, we'd expect strong resistance between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 and finally bring long term down trend resumption.

In the longer term picture, 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. Another low below 1.3503 is anticipated after rebound from 1.3503 is confirmed to be completed.

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