**GBP/USD: Sterling Drops 1.5% After Hitting Resistance at Double Top – What’s Next?**
*Based on the original analysis by Peter Hanks on TradingView.*
The British pound (GBP) experienced a noteworthy reversal last week in the foreign exchange (Forex) market, falling 1.5% against the US dollar (USD) after encountering formidable technical resistance. This drop has reignited volatility in one of the world’s most widely traded currency pairs: GBP/USD. The pair’s trajectory over the past several months, recent economic catalysts, and technical levels now command heightened attention among traders and investors.
This article explores the current state of GBP/USD, dissecting the technical landscape, reviewing key macroeconomic narratives, and outlining potential scenarios for the near-term future. Drawing upon the original report by Peter Hanks, as well as additional context, we aim to provide a comprehensive outlook for traders and market enthusiasts.
## GBP/USD Pullback: What Triggered the 1.5% Slide?
GBP/USD was riding a bullish streak for much of Q1 and into Q2 2024, buoyed by a series of robust data prints from the UK economy and fading US dollar strength. However, after approaching long-standing technical barriers near the 1.28 level—specifically a clear double top formation—upward momentum faltered. Selling pressure intensified and the pair retraced around 1.5% over several sessions, sinking back toward the 1.26 handle.
Several intertwined factors contributed to this reversal:
– **Technical resistance at the double top:** The area around 1.2800 had repeatedly capped advances over the past nine months, forming a textbook double top. This technical hurdle was seen by many as an inflection point for trend-following traders.
– **Improving US macroeconomic data:** Renewed signs of resilience in US non-farm payroll data and persistently sticky core inflation reignited demand for the dollar, particularly as traders reassessed the timing of Fed interest rate cuts.
– **Dovish tilt from the Bank of England:** While not outrightly signaling immediate rate cuts, the BoE’s language became more cautious in response to softening UK inflation and growth risks.
### Technical Analysis: Mapping Out Resistance and Support
**The Double Top Formation**
A double top is a classic chart pattern that signals waning buying interest and sets the stage for potential reversals. In GBP/USD, the zone between 1.2800 and 1.2850 had previously been tested in July and December 2023 without a successful break. The recent rally saw the pair stall in this same zone before aggressive selling resumed. This pattern is often viewed as a distribution phase where bulls exit and bears gain conviction.
**Key Technical Levels and Patterns**
Reviewing the GBP/USD daily chart, a few technical observations become vital for near-term forecasting:
– **Resistance Levels:**
– 1.2800 to 1.2850: The double top and key supply zone
– 1.3000: Psychological resistance not visited since mid-2023
– **Support Levels:**
– 1.2630 to 1.2600: Short-term support, recently tested after the sell-off
– 1.2500: Major support, aligning with 100-day and 200-day simple moving averages (SMA)
– **Momentum Indicators:**
– Relative Strength Index (RSI) softened from overbought readings
– MACD histogram flipped negative, hinting that bearish momentum is in motion
If the pair fails to regain traction above 1.2670 to 1.2700, risk remains for a retest of lower supports. Conversely, reclaiming 1.2800 with conviction would undermine the validity of the double top and open the door for renewed bullish flows.
#### Chart Structure Summary
– **Range-bound movement:** Between 1.2500 (major support)
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