GBP/USD's fall from 1.6618 extended further last week but lost momentum again ahead of 1.6110 support. A temporary low should be in place and initial bias is neutral this week. Nevertheless, with daily MACD negative, we're slightly favoring the case that rebound from 1.5780 has finished at 1.6618 already. Hence, deeper decline is expected as long as 1.6454 resistance holds. Break of 1.6110 will confirm this bearish case and should target 1.5780 support next. On the upside, though, break of 1.6454 will suggest that rise from 1.5780 is still in progress and will flip bias to the upside for 1.6618 and above.

In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4229 is treated as the third leg of such consolidation. Question remains on whether such rise is finished at 1.6746 already and we don't have a clear view on it yet. In any case, break of 1.5780 support will favor the case that GBP/USD has already topped out at 1.6746, after completing a head and should top. In such case, medium term outlook will be turned bearish for 1.3503/4229 support zone. Such move would either be the fourth leg of the consolidation from 1.3503, or resuming long term down trend from 2.1161. On the upside, above 1.6746 will extend the rise from 1.42298 to 1.7043 and above. But we'd expect strong resistance at 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside and bring reversal.

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 consolidation from 1.3503 is confirmed to be completed.

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