GBP/USD Weekly Outlook

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is treated as a correction to down trend from 2.1161, has completed at 1.7043. Firm break of 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) will confirm this case and indicate that whole down trend from 2.1161 is likely resuming for a new low below 1.3503. However, note that break of 1.6456 resistance will in turn shift favor to the case that recent price actions from 1.7043 are merely developing into consolidations to the larger rise from 1.3503. That is, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

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. Rebound from 1.3503, which is treated as correction in the larger down trend, should be limited by resistance zone of 1.7332/8236 and bring down trend resumption towards 1.4063 low. We'll hold on to the bearish view as long as 1.8236 fibonacci level holds.