GBPUSD dropped as low as 1.2074 after breaking the 1.2246 neckline of the bearish double top pattern on the four-hour chart. The price is now pushing efforts to recover above that border and distance itself from its shorter-term moving averages (SMAs) in order to eliminate negative trend signals.
With the RSI ready to expand above its 50 neutral mark and the Stochastics having yet to confirm overbought conditions, additional gains could be possible in the short-term. However, on the way up, the pair may need to successfully overcome the restrictive 50-period SMA at 1.2270 to pick up steam towards the 200-period SMA and the 1.2430 barrier. A close above 1.2520 could subsequently allow the pair to re-challenge the key double-top territory around 1.2645, where any violation would re-activate the uptrend from the 35-year low of 1.1409, shifting resistance up to 1.2760.
In case the 50-period SMA rejects upside corrections, the 20-period SMA at 1.2180, which currently coincides with the 38.2% Fibonacci level of the 1.1409-1.2645 upleg, should come to the rescue to keep the focus on the upside. If not, negative trend signals would resume, bringing the 1.2074 support level back into view. Lower, the bears may take a breather near 1.1975 before hitting new bottoms around the 61.8% Fibonacci of 1.1880.
Summarizing, GBPUSD is attempting to brash away bearish trend signals the double top formation generated. Besides the 1.2246 neckline, the pair may need to close decisively above the 50-period SMA to recoup more ground.
