The GBP/USD has been defying gravity throughout May with the pair breaking below March low at 1.5644 in early trading. The fact that the bulls are unable to push the pair higher at these extreme levels suggests that there could be further downside potential. As the ongoing turmoil in Europe continues to weigh heavily on investor confidence and the headline-driven market continues to prop up the greenback’s safe haven status, the dollar could mark a fresh high before it rebounds. From a technical point of view, the outlook remains heavily bearish for the sterling after the 61.8 Fibonacci level, from January’s low to April’s high, was broken. With the MACD signal line well below the zero line and the RSI hovering below 30 on the daily chart, the sterling’s downward trend against the greenback looks to be continuing. As long as resistance at 1.5661 remains intact, there is potential for further downside all the way down to 1.5550.
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