GBP/USD Weekly Outlook

The choppy recovery from 1.5804 extended to as high as 1.5983 last week but Friday's sharp decline indicates that fall from 1.6060 is ready to resume. Initial bias is on the downside this week and break of 1.5804 will target 1.5602 support next. Note that whole rebound from 1.5234 is likely completed at 1.6060 already. Break of 1.5602 should confirm and target a test on f 1.5234 low. We'll continue to favor this bearish case as long as 1.5983 minor resistance holds.

In the bigger picture, price actions from 1.3503 are treated as consolidations to long term down trend from 2.1161, no change in this view. Recent development painted a mixed picture on whether such consolidation is finished. We'll stay neutral first. On the upside, break of 1.6165 will favor that such consolidation is going to extend with another rise. But strong resistance should be seen at 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside to conclude the consolidation. On the downside, below 1.5234 will revive the case that such consolidation is completed and bring deeper fall to 1.4229 support for confirmation.

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.