GBP/USD Forecast: cable seems vulnerable to extend its downslide

Having registered the third consecutive week of declines and testing its lowest level since mid-August, the GBP/USD pair witnessed a minor bounce back during Asian session on Monday but remained below 1.3000 psychological mark. Meanwhile, the EUR/USD pair maintained its near-term range-bound trading action and traded with mild negative bias ahead of ECB President Mario Draghi's testimony before the Committee on Economic and Monetary Affairs of European Parliament later on Monday.

Last week, the greenback weakened broadly after Fed decided to leave interest rates unchanged and downgrade its economic projections. However, the US Dollar pared some of its post-FOMC losses on Friday, primarily led by a sharp weakness in the British Pound after UK Foreign Secretary Boris Johnson hinted towards the possible timing of triggering Article 50 that would officially kick-start the process of ending Britain’s association with the European Union.

Today's economic calendar features the release of German Ifo Business climate from Euro-zone, while from the US focus would be on the release of New Home Sales data for the month of August.

Technical outlook

GBP/USD

On 4-hourly chart, the pair seems to be oscillating within a short-term descending trend-channel but has managed to hold and rebound from an ascending trend-line support and from near-term oversold conditions. However, with short-term technical indicators moving out of oversold territory and possibly turning lower again, the pair is likely to confront renewed selling pressure around 1.3000 psychological mark and head back to retest the ascending trend-line support currently near 1.2935-30 region. On a sustained break below this strong support, the pair might turn vulnerable to break through August lows support near 1.2870-65 zone and aim towards testing the ascending trend-channel support near 1.2840 region.

Conversely, a decisive move back above 1.3000 resistance should trigger an immediate short-covering rally that might lift the pair immediately towards 1.3030 resistance before the pair eventually rises to the descending trend-channel resistance near 1.3075-80 region. A decisive strength above 1.3080 resistance area would negate the bearish channel and open room for additional near-term recovery for the pair.

EUR/USD

Although the pair held on to its strength above 100-day SMA, it has failed to attract any follow through buying interest and remained capped below 1.1250-60 strong resistance. This 1.1250-60 continues to be an immediate strong hurdle, which if cleared decisively should accelerate the up-move towards 1.1300 handle. A subsequent momentum beyond 1.1300 level now seems to open room for further appreciating move for the pair towards August daily closing high resistance near 1.1350 region.

Meanwhile, short-term technical indicators are turning into bearish territory and hence, on a sustained weakness back below 1.1200 handle, leading to a break through 100-day SMA support near 1.1185 area, the pair could be headed back to retest 200-day SMA support near 1.1150 region en-route its next major support near 1.1125-20 horizontal zone. A decisive break below 1.1125-20 support would negate any near-term bullish bias and attract fresh selling pressure that should drag the pair immediately towards 1.1050 support before the pair breaks below 1.1000 psychological mark and head towards testing July closing lows support near 1.0980-75 region.