After rallying from an April and the year’s low at 1.4564 to 1.5492, GBP/USD fell last week. The 4H chart shows the retreat to about 1.51. This broke below a rising tendline. The 4H RSI broke 40, which showed loss of the prevailing bullish momentum. However, it would probably take a break below 1.4950 to put pressure back to the 1.4564 low. Instead, price started the week holding above 1.51 and is now pushing above 1.52.
Now, the market is not bearish yet, but the bullish outlook does not look ready to continue neither. What concerns me is the 5-wave structure of the bearish swing, which suggests that the bearish correction or consolidation against the prevailing uptrend is not over. Therefore, for now, we should limit the bullish outlook to the 1.53 level, and be read for another correction swing down towards 1.51, and possibly 1.50, which would still be in context of a bullish market in the medium-term.
The daily chart shows a market that is essentially turning a bearish trend into a sideways one if not a bullish one. If the short-term outlook remains bullish, the next resistance could be up to 1.5765 area, a previous resistance level. Reaching this high would require breaking the high on the year, which is at 1.5620.
Now, we noted that a dip to 1.50 would still be within the bullish outlook. A break below it would clear below the 50-day SMA, which could reflect revival of the bearish outlook. A break below 1.4950 would clear another set of support and support/resistance levels, which would add more weight to the bearish continuation scenario.
Basically, we should expect more consolidation, more bullish correction as long as GBP/USD holds above 1.4950. In fact a test of the 1.4950-1.50 level as support would give traders more reasons to trader up the GBP/USD towards the 2015-high as well as the 1.5785 resistance.
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