GBPUSD slid last week, and it is now flirting with the 1.2600 level which appears to be the neckline of a Head and Shoulders (H&S) that’s been forming since June 14. Overall, the pair is trading below the uptrend line drawn from the low of October 12, below the 50- and 100-day exponential moving averages (EMAs), but still above the 200-day EMA. A completion of the H&S pattern and a dip below that moving average may be needed to signal a trend reversal.

The MACD is running below both its zero and trigger lines, while the RSI, although below 50, shows signs of bottoming near its 30 line. This could result in a minor bounce before a decisive dip below 1.2600.

If the bears are strong enough to drive the battle below that zone and then through the 200-day EMA, they may have to face the 1.2380 barrier, marked by the low of May 25. A break lower could carry larger bearish implications, perhaps paving the way towards the round number of 1.2000, marked by the low of March 15.

On the upside, the move that could signal the resumption of the prior uptrend may be a rebound back above the 1.2995 level, marked by the high of July 27. If so, Cable will be back above the aforementioned uptrend line and the bulls could get encouraged to challenge the high of July 13 at 1.3147, the break of which would confirm a higher high and perhaps set the stage for advances towards the 1.3640 territory, which acted as a ceiling during February 2022.

To recap, GBPUSD seems to be flirting with the 1.2600 zone, the clearing of which may signal the completion of a Head and Shoulders pattern on the daily chart. However, for a trend reversal to be established, the pair may also need to overcome the 200-day EMA.