Cable has continued to trade lower after forming a potential longer-term double top around 1.6300/10 in late-September, which was coincided by an RSI bearish divergence into these highs. Since then, I’ve continued to believe that Sterling has been a sell on rallies until it approaches the key 38.2% Fibonacci retracement (using the June low & September high) – Traditionally, technicians believe this level is the minimum retracement before a prior trend can resume. Furthermore, there have been multiple bearish candlestick formations (namely shooting stars & bearish engulfing patterns) which have marked multiple highs over the past few weeks.

That said, GBP/USD is approaching numerous key technical levels which could prove supportive over the coming days:

• 1.5910/15 – 38.2% retracement
• 1.5890/00 – Daily 144 & 169 EMA’s
• 1.5890 – Bottom of both the daily & weekly Ichimoku Clouds
• 1.5865 – 100-day sma
• 1.5850 – 200-day sma
• 1.5785/90 – 50% retracement
• 1.5765/85 – Convergence of key highs & lows

It may prove beneficial to keep a watchful eye on daily RSI as it is currently testing the key 40 level (often this oscillators shows leading characteristics) – A daily close below this would suggest Cable is in a renewed downtrend and significant declines could be in the offing. A break below the noted 1.5765/85 zone would be a critical technical blow to GBP/USD bulls out there.

Chart Source: Forex Charts by eSignal