GBP/USD Rebounds from Near 1.3270, but Outlook Stays Negative

GBP/USD fell sharply yesterday, breaking below the lower end of the sideways range that had been containing the price action since February 1^st. The rate found some buying orders near the 1.3270 barrier, and then, it rebounded. However, the recovery was stopped at 1.3440, well below the lower end of the aforementioned range, which is at 1.3490. Therefore, we prefer to maintain a bearish stance with regards to this pair.

A clear dip back below 1.3355 may confirm that the corrective bounce is over and may allow another test near the 1.3270 zone. A break lower would confirm a forthcoming lower low and is likely to pave the way towards the 1.3200 territory, defined as a support by the low of December 21^st. If that barrier doesn’t hold, then the slide may extend towards the low of the day before, at around 1.3170.

Shifting attention to our short-term oscillators, we see that the RSI, although it rebounded back above 30, it shows signs of topping again, while the MACD remains below both its zero and trigger lines, showing signs that it could also turn down. Both indicators detect downside speed and support the notion for another round of selling in this exchange rate.

In order to abandon the bearish case, we would like to see a clear recovery back above the1.3490 barrier, the lower end of the pre-discussed range. This could signal the return back into a trendless mode and may initially target the 1.3540 barrier, marked by the low of February 22^nd. Another break, above 1.3540, could extend the advance within that range and perhaps aim for Wednesday’s peak, at 1.3620, or the upper bound of the range, at 1.3640.

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