GBP/USD edged higher to 1.4376 last week but reversed and dropped sharply to close at 1.3995. Initial bias remains on the downside this week for 1.3965 support first. Break there will pave the way to 1.3711 key support level. On the upside, above 1.4069 minor resistance will turn intraday bias neutral and bring consolidations. But for now, near term risk will stay on the downside as long as 4 hour 55 EMA (now at 1.4173 holds).
In the bigger picture, bearish divergence condition in daily MACD is raising the chance of medium term reversal. Also, note that GBP/USD has just failed to sustain above 55 month EMA (now at 1.4257). Focus is back on 1.3711 support. Firm break there will confirm medium term reversal and target 38.2% retracement of 1.1936 (2016 low) to 1.4376 at 1.3448 first. Break will target 61.8% retracement at 1.2874 and below. For now, sustained break of 55 month EMA is needed to confirm medium term upside momentum. Otherwise, we won’t turn bullish even in case of strong rebound.
In the longer term picture, rise from 1.1946 (2016 low) is viewed as a corrective move, no change in this view. Focus stays on 55 month EMA (now at 1.4257. Rejection from there will turn focus back to 1.1946 low and could probably extend the down trend from 2.1161. On the other hand, sustained break of the EMA would at least bring further rally to 38.2% retracement of 2.1161 (2007 high) to 1.1946 (2016 low) at 1.5466.