GBP/USD Likely Forming Double Top, More Losses Likely

Key Highlights

  • GBP/USD is likely forming a double top pattern near 1.2640-1.2650.
  • It declined below a key bullish trend line at 1.2450 on the 4-hours chart.
  • The US ISM Non-Manufacturing Index might dive from 52.5 to 32.0 in April 2020.
  • The UK Services PMI could decline from 12.3 to 12.2 in April 2020.

GBP/USD Technical Analysis

This past week, the British Pound climbed above 1.2600 against the US Dollar. However, GBP/USD failed once again to clear the 1.2640-1.2650 resistance area and declined recently.

Looking at the 4-hours chart, the pair seems to be forming a crucial double top pattern near the 1.2640-1.2650 region. It started a strong decline from the 1.2643 high and declined below the 1.2520 support.

Besides, there was a break below the 1.2500 level, a key bullish trend line at 1.2450, and the 100 simple moving average (red, 4-hours). More importantly, there was a break below the 50% Fib retracement level of the upward move from the 1.2247 low to 1.2643 high.

If there are more losses, the pair is likely to decline towards the 1.2340 level or the 76.4% Fib retracement level of the upward move from the 1.2247 low to 1.2643 high.

If the mentioned double top pattern is valid, the pair could continue to move down towards the 1.2200 level. Conversely, the pair might start a fresh increase above the 1.2450 resistance.

The main resistance is near the 1.2500 region, above which the bulls are likely to aim a test of the 1.2600 and 1.2620 levels in the near term.

Overall, GBP/USD remains at a risk of a sharp decline as long as it is below 1.2500. Looking at EUR/USD, the pair is correcting gains, but it might find support near 1.0880.

Upcoming Economic Releases

  • UK’s Services PMI for April 2020 – Forecast 12.2, versus 12.3 previous.
  • US ISM Non-Manufacturing Index April 2020 – Forecast 32.0, versus 52.5 previous.