GBPUSD’s recovery may already be coming to an end, according to David Sneddon and his team at Credit Suisse in London.
Sneddon points out that GBPUSD has seen an aggressive rejection of its 40-day moving average, now at 1.2297, with the sell-off extending back below the neckline towards the small base. He says the risk stays lower with support coming at 1.2157/55 and then the short-term uptrend at 1.2123/22 , though a break below 1.2109 is needed to neutralise the base and suggest the recovery is indeed over (see Chart).
Looking further below, Sneddon sees support at 1.2015, the current cycle low, ahead of long-term support at 1.1986/58, which includes the long-term uptrend from 1985.
To the upside, a move above resistance at 1.2252/56 would see at retest of 1.2297/1.2310. Beyond here, Sneddon says the recovery theme would be reasserted with resistance next seen at 1.2337 (the 23.6% Fibonacci retracement of the March to August fall) and then the mid-July low at 1.2382.
Overall, his one month outlook is bearish. A close below 1.2109 is needed for the downtrend to resume, while resistance has moved to 1.2252/56.