GBP/USD’s recent rallies seem to be over as the pair ranged between the 1.6200 handle and the 1.6000 area in the past few weeks. In fact, a reversal chart pattern can be seen on the daily time frame, as the pair made a double top formation.

The pair is still around a hundred pips away from testing the neckline of the pattern, but sellers could be drawn to that level in the coming days. Stochastic is moving down from the overbought region, which suggests that pound bears can push the pair lower.

Take note though that GBP/USD has yet to break below the key 1.6000 support level and the neckline of the pattern at 1.5900 before a longer-term downtrend is confirmed. The pattern is roughly 300 pips in height so the resulting breakdown could be of the same size.

By Kate Curtis from Trader’s Way