**GBP/USD: Sterling Drops 1.5% After Hitting Resistance at Double Top — What’s Next?**
*Original analysis by Daniel Dubrovsky, as published on TradingView News.*
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The British pound (GBP) experienced a sharp reversal against the US dollar (USD), triggering significant market conversations among forex traders following a 1.5% drop. This move occurred shortly after GBP/USD encountered meaningful resistance at a technical pattern known as a *double top*, raising critical questions about the currency pair’s trajectory in the near and medium term.
In this detailed analysis, we dive deep into the technical and fundamental landscape surrounding GBP/USD, examine the factors contributing to recent price action, and outline potential scenarios that pound traders should keep on their radar.
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## Key Points
– GBP/USD lost 1.5% after failing at resistance marked by a double top.
– Multiple technical signals suggest risk of further downside in the near term.
– Market sentiment is shifting as traders reassess the outlook for UK and US monetary policy.
– Key support and resistance levels may determine whether the downtrend accelerates or stabilizes.
– Longer-term trends remain uncertain given macroeconomic and geopolitical variables.
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## Understanding the Double Top Pattern
The double top pattern is a classic reversal signal in technical analysis. It indicates that a previously bullish trend may be losing steam and that sellers are gaining the upper hand.
– The pattern forms when price rallies to a high, pulls back, then returns to the same high but fails again, setting up potential for a sustained decline.
– In the case of GBP/USD, resistance manifested just below the 1.2850 level. The pound tested this area twice without breaking through, then reversed lower.
– The double top can often be confirmed using momentum oscillators like the Relative Strength Index (RSI), which in this case showed signs of overbought conditions, warning that the rally was running out of steam.
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## Examining the 1.5% Drop: What Drove Sterling Lower?
Several interconnected factors help to explain the abrupt decline in GBP/USD after approaching the double top:
**1. US Dollar Resurgence**
– Renewed strength in the US dollar has created downward pressure on the pound.
– Factors underpinning the dollar rally include resilient US economic data, persistent inflation, and the Federal Reserve’s cautious approach to interest rate cuts.
– The greenback has benefited from safe-haven flows as global uncertainties, such as trade tensions and geopolitical risks, prompt investors to seek stability in major currencies.
**2. Hawkish Fed Tone**
– Federal Reserve officials have recently signaled reluctance to cut rates aggressively, citing ongoing inflation risks.
– Market participants who previously anticipated imminent rate reductions were forced to adjust their expectations. This recalibration fueled further USD demand and weighed on high-beta currencies like GBP.
**3. Dovish Bank of England (BoE) Guidance**
– The BoE has hinted at keeping a dovish outlook compared to other major central banks, notably the Fed.
– Softer UK economic data, especially in areas like wages and consumer spending, has reduced the likelihood of imminent BoE rate increases.
– The lack of hawkish signals from the BoE adds downward pressure to sterling.
**4. Technical Triggers**
– The double top formation itself is a powerful psychological and technical barrier. As GBP/USD failed to break higher, stop-loss orders were likely triggered, accelerating the pace of the selloff.
– Momentum traders capitalized on the reversal, amplifying volatility and extending the move downward.
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## Key Technical Levels to Watch
Price action enthusiasts often watch for reactions at specific chart levels, especially around major chart patterns such as the double top.
### Immediate Resistance
– **~1.2850 (Double Top Area):** This is where GBP/USD encountered resistance and reversed lower. Bulls would need a clear break and daily close above this level to invalidate the bearish pattern and revive upside potential.
– **1.3000 (Major
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