GBPUSD switched to recovery mode after bottoming to a five-month low of 1.2558 on Friday. With the RSI strengthening above its 30 oversold level and the MACD surpassing its red signal line, the pair may gain further ground in the short-term. Yet downside risks remain as long as the indicators hold in bearish territory. Note that the market has violated its December upward pattern after the drop below 1.2864.
Immediate resistance to upside movements could emerge around 1.2750 but a closing price above 1.2770 – the 61.8% Fibonacci of the 1.2393-1.3380 bullish wave – could prove more important for the rally to continue. Even higher, a taller wall could be standing around the previous low of 1.2864.
The 78.6% Fibonacci of 1.2600 has proven a reliable support level in previous sessions and therefore should be closely watched in case negative momentum resumes. Even deeper, a significant decline below the five-month low of 1.2558 would open the way towards the 1.25-1.2475 restrictive area.
In the medium-term time-frame, the outlook turned more bearish after the drop below the 61.8% Fibonacci. The falling 50-day simple moving average (SMA), which crossed under the 200-day SMA on Friday, could be a signal that a bull market may come later than sooner.
In brief, downside risks have somewhat decreased in the short-term as the technical indicators are supporting a bullish retracement, while in the medium-term the bearish outlook has turned stronger.
