GBPUSD Reversal Underway

The GBPUSD double top trade is back on track now. The brief recovery above the neckline and 1.2800 support has since folded with the pair reversing and heading down to the first target at 1.3676. With MACD and RSI both bearish, the focus stays on further downside while the 1.38 level holds as resistance. To the downside, the next target to note is the 1.3461 level.

GBP has come under selling pressure this week amidst fears the government’s freedom day reopening (Monday) will end in disaster. With cases rising and other countries issuing fresh lockdowns, critics suggest the move will simply lead to the return of full lockdowns in the coming months. Meanwhile, USD is deriving strong safe haven support currently, as a result of the sell-off in equities, meaning there is room for the pair to push lower this week.

Key Data to Watch

The next round of UK and US PMIs are due on Friday. While these releases typically draw focus, given the current backdrop of heavy risk-off flows, the bigger focus this week will be on how the current theme develops. If USD continues to rally on safe-haven inflows and risk assets remain under pressure over COVID fears, GBPUSD should continue to trade lower this week.