GBP/USD forms bearish double top, confirmation required [Video]

GBPUSD raised questions over its four-month-old positive trend after failing to print a new higher high above December's peak of 1.2445, subsequently crashing below two support trendlines.

Despite the latest rapid downfall, the bullish pattern remains intact as the bears have not charted a new lower low below January’s trough of 1.1840. The flattening 200-day simple moving average (SMA) and the 23.6% Fibonacci retracement of the 1.0324-1.2445 upleg are also on guard slightly higher at 1.1945 as the falling technical indicators are flagging more losses ahead. Yet, with the stochastic oscillator having dipped well in the oversold zone, there is a potential for an upside correction.

If the bears snap the 1.1945 floor, the pair may tumble towards the 1.1740 constraining zone, confirming a bearish double top pattern. Slightly lower, the 38.2% Fibonacci level of 1.1635 may attempt to protect the market from another aggressive downfall that may stall near the 50% Fibonacci mark of 1.1385.

On the upside, the pair is facing strong resistance from the long-term descending trendline that was indestructible during the 2007-2020 period at 1.2030. A close back above that line could be the key for a bounce back into the 1.2175-1.2280 zone formed by the 20- and 50-day SMAs and the broken support trendlines. If buyers pierce through that wall too, the focus will shift again to the 1.2445 bar. A sustainable close higher could then prompt a rally towards May’s barrier of 1.2600-1.2665.

All in all, GBPUSD sellers seem to be holding the upper hand at the moment, waiting for a clear extension below 1.1945 to gain fresh impetus. Alternatively, a move above 1.2030 is expected to motivate some buying.