GBP/USD – Stalking a Double Top

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The GBP/USD is starting the week with a near-term double top, seen in the 1H chart.

GBP/USD 1H Chart 5/18
gbpusd 1h chart 5/18
(click to enlarge)

It is not one of those nice looking double tops with the left and right side being symmetric. nonetheless we can see failure to break above 1.5815 twice followed by a break below a common support around 1.57.

Also note that price is now below the 100-, and 50-hour simple moving averages (SMAs), which reflects some loss of the prevailing bullish bias. We also saw the 1H RSI fall below 40 and even tag 30, which reflects loss of the prevailing bullish momentum. The fact that it tagged 30 then held below 60 and is pushing towards 30 again shows that the market is already developing bearish momentum in the near-term.

Now, during the 5/18 US session, if price climbs back above 1.5750, the bearish breakout would be invalid, and the pressure would be back towards the 1.5815 high with risk of breaking higher and extending the already existing uptrend in the short-term. The market is already at new highs on the year, and has the 1.60 psychological level in sight.

However, if price holds under 1.5750, there is downside risk towards the 1.5550 area, which is near a previous support and the 200-hour SMA.

GBP/USD 4H Chart 5/18
gbpusd 4h chart 5/18
(click to enlarge)

When we check out the 4H chart, we notice that, even below 1.5550, there are some key support factors. If price can hold above 1.54 and preferably the rising trendline coming up from the 1.4564 low on the year, then the uptrend would still be intact. The 4H RSI should also hold above 40 if GBP/USD were to remain bullish. A break below 1.54 can open up the 1.51 support pivot and neutralize the bullish trend.

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Fan Yang has been a professional forex trader and analyst since 2007. He specializes in technical analysis and has a Chartered Market Technician designation since 2011. He was the chief technical strategist at CMSFX He was also the founder and chief currency strategist at FXTimes Over the years, Fan has not only been a trader and analyst but also an educator. As a proponent of both technical and fundamental analysis in trading, Fan advocates simplicity and discipline as key factors in making trading decisions when faced with so many "clues" and "signals". Currently Fan Yang is the chief currency analyst and webinar instructor at forexminute.com.