GBP/USD rallies to exit from sideways movement; bearish outlook in the medium-term.
GBP/USD has reversed back down after the pullback on the 1.3255 resistance level, while it dipped sharply on Monday below the 23.6% Fibonacci retracement level of the down-leg from 1.4375 to 1.2660, near 1.3066. Also, cable is holding well below the 20- and 40-simple moving averages (SMA) which are ready to create a bearish crossover. The short-term bias seems to be neutral as the price holds within the 1.3300 resistance and the 1.2920 support over the last six weeks.
According to the MACD, negative momentum could push for further losses in the short-term as the indicator weakens below its red signal line. The RSI is also hitting to the downside in the negative territory, indicating a continuation of the bearish pressure on the price action.
The downside movement could stall at the support level of 1.2920, taken from the latest lows. Further below, 1.2780 could also provide support and then investors would turn their focus on the 14-month low of 1.2660 as the pair was unable to fall significantly under that line in the last two months and any violation at this point could potentially trigger further sell-off in the market, probably leading the price down to 1.2360, identified by the trough on April 2017.
In the positive scenario, where the price tries to expand above 23.6% Fibonacci mark, a new top could be formed around 1.3255. If the market manages to overcome that area, traders could look for resistance at the 1.3300 psychological level, which stands near the 38.2% Fibonacci of 1.3315, before steeper bullish actions take the price up to the 1.3475 level.
To sum up, regarding the medium-term picture, the bearish outlook remains as the price failed to surpass the 1.3300 level in the previous sessions, while a dive below 1.2660 could reinforce the negative sentiment.
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