The dollar has really strengthened in recent weeks and as a result the GBP/USD has taken a bit of a battering. Furthermore there's been an interesting development on the monthly chart with the positive Supertrend being broken for the first time since mid-2002.

The GBP/USD has been in a stong uptrend during this time but if the current monthly bar closes below 1.8918, ie the current Supertrend level, and confirms the break in trend, then there is no reason why the GBP/USD couldn't drop to it's EMA (200) at 1.7375 initially and then possibly even further to 1.70 or 1.60.

It's all ifs and buts at the moment because the price could rebound above the Supertrend level before the end of the month and the upwards trend will therefore still be intact, but if it stays below this level then this marks the start of a new downwards trend, and we could well see further drops.

Have a look at the monthly chart below and you will see exactly what I mean, and why there is potential for a substantial drop in the coming months: