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GBP/USD - Does Today's Sharp Slide Imply Further Weakness Ahead

The GBP/USD dived in today's session which corresponded well to another sharp swing down at the end of last week.

  • Looking at the daily chart, it begs the question, do we have a reversal/topping pattern upon us and a further retrace to come?
  • The important level to watch would be the 1.5885 area which is a pivot established in the middle of September. However, the pair may need to first move higher, to resolve any oversold condition in the short-term, perhaps up to the 1.6020 area.
  • A break there would open up a further retrace towards 1.5720, the old resistance level prior to the run-up in anticipation of the FOMC meeting.
  • There were some weak macro data from the UK to act as a catalyst, so this could be an over-reaction, but we could also have seen a peak to the positive surprises from the UK economy and as a result, GBP weakness may linger.
  • This is especially true if the USD becomes a target for safe haven flows, which so far it has not been, but we started to see some of that as the debt ceiling date gets closer.

- Nick