GBPUSD could be done with its short-term selloff since the pair is creating a double bottom reversal formation on its 1-hour time frame. 

At the same time, the short-term simple moving average is crossing above the long-term 200 SMA, suggesting that a rally might take place.

Stochastic is indicating overbought conditions, which means that pound bears are still in control of price action. RSI is still moving up, hinting that another move higher could be possible. A break above the neckline around the 1.5400 major psychological level could lead to around 200 pips in gains for the pair, which is the same height as the formation.

On the other hand, if the 1.5400 mark continues to keep gains in check, price could move back south to the previous lows around 1.5200. Stronger selling pressure could even lead to a break of support and further losses, possibly until 1.5000 or lower.

The path of least resistance is to the downside since the US just printed a stronger than expected jobs report for May. This was enough to draw dollar bulls back to the game, as expectations for a Fed rate hike in September strengthened. Event risks for this trade include the US retail sales release on Wednesday, although both headline and core figures are expected to show stronger gains.

If so, GBPUSD could resume its longer-term decline and eventually aim for the major support near 1.4600. On the other hand, bleak data from the US could lead traders to doubt a potential Fed rate hike, which might then force the US dollar to return its recent gains.

Only the UK trade balance is up for release today, but BOE Governor Carney is set to give a testimony tomorrow and possibly spur volatility among pound pairs.

By Kate Curtis from Trader’s Way