GBP/USD has been trading in a sideways manner between 1.3450 and 1.3600, since the beginning of May. Thus, we see a flat short-term picture for now. That said, the rate continues to trade below the prior long-term uptrend line drawn from the low of the 14th of March 2017, which keeps the bigger picture negative in our view. Therefore, we see a bigger chance for the pair to exit the range to the downside rather than to the upside.
A decisive break below 1.3450, the lower end of the short-term range, could set the stage for extensions towards our next support of 1.3330, marked by the low of the 21st of December, or even the 1.3300 hurdle, defined by the lows of the 12th and 17th of the same month. Another dip below 1.3300 could carry more bearish implications, and perhaps open the way towards 1.3220, a support marked by the low of the 28th of November.
Turning attention to our short-term momentum studies, we see that the RSI turned down from near its 50 line and now looks ready to challenge its upside support line, while the MACD, already negative, has turned south as well and appears able to fall below its trigger line soon. A price dip below 1.3450 accompanied by a break of the RSI below its support line and a dip of the MACD below its trigger line could strengthen further the case for a decent negative leg.
On the flip side, a break above the range’s upper bound of 1.3600 may turn the short-term picture somewhat positive and could initially aim our next resistance of 1.3670. If that level does not prove strong enough to stop the rate from recovering further, then we may see a test near 1.3720, a level marked by the inside swing low of the 30th of April.
However, even in such a case, the rate would still be trading below the prior long-term uptrend line. Hence, we would treat such a recovery as a corrective rebound. We would like to see a clear close back above 1.3800 before we start examining whether the bigger outlook has changed.
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