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GBP/USD Testing its 2014 Rising Trendlines

Today the USD rallied on the back of better-than-expected Q2 GDP Data. According to the Bureau of Economic Analysis (BEA), GDP in Q2 grew at an annual rate of 4.0%, beating forecasts of around a 3.1% reading. Q1 GDP was revised from -2.9% to -2.1%. 

USD-strength was broad, and the GBP/USD fell below 1.69 on the back of the GDP data. The 4H chart shows the market continuing a slide from the 1.7190 high on the year.

(gbpusd 4h chart, 7/30)

If we get a pullback, note that 1.70 is this week's high. The 1.70 handle was also a resistance pivot at the beginning of May (seen in the daily chart). Holding below 1.70 will keep the bearish outlook and price will likely continue to pressure the trendlines around 1.69 seen in the daily chart. In this scenario, there is downside risk toward the 1.67 handle, and lows from June.

(gbpusd daily chart 7/30)

IF the trendlines hold after today's FOMC meeting, we are likely to see GBP/USD consolidate. In this scenario, there is  near-term upside risk back toward 1.70. If price pushes above 1.70, we should monitor the 1.6980-1.71 area as a key resistance. A break above 1.71 can signal bullish continuation especially if the 2014-trendlines were intact. 

With the daily RSI dipping below 40 and approaching 30, we should lean towards the bearish scenario. Therefore, when the 4H RSI comes back to 60, look for sellers to continue the current decline.

Again, a break above 1.71 can liberate the GBP/USD from is consolidation/bearish correction mode.