GBP/USD dropped further to as low as 1.6166 last week and the break of 1.6250 support confirms that rebound from 1.5706 has completed at 1.6875 already. While some more sideway trading might be seen initial this week above 1.6166, upside should be limited below 1.6515 and bring fall resumption. As discussed before, below 1.6166 will bring deeper decline to retest 1.5706 support first.
In the bigger picture, we're still slightly favoring the bearish case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Focus now turns to 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) for confirmation. Break there will argue that whole down trend form 2.1161 is likely resuming for a new low below 1.3503. On the upside, however, break of 1.7043 will indicate that rise from 1.3503 is still in progress to resistance zone of 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.
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