- GBP/USD dropped sharply to break its 8-month bullish trend line last week
- Slow Stochastics now in oversold territory, raising the probability of a near-term bounce
- Potential for more medium-term weakness as long as rates stay below 1.70
The GBP/USD sold off sharply last week, dropping below the bullish trend line that had reliably guided prices higher since last October. As a reminder, a break of an uptrend does not necessarily imply an immediate shift to a downtrend; instead we may see rates move sideways in the short term, or even rally at a more gradual pace. Looking to the secondary indicators, the MACD is strongly bearish at this point, though the oversold Slow Stochastics may lead to a bounce off 78.6% Fibonacci support near 1.6800 early this week. As long as rates remain below psychological resistance at 1.70, there is the potential for more weakness.