GBPUSD has formed lower highs and lower lows inside a falling channel on its 4-hour time frame. Price is in the middle of a pullback and is testing the 50% Fibonacci retracement level.

A larger correction could reach the 61.8% level at 1.2557 near the channel top and a minor psychological mark. If any of the Fibs hold as a ceiling, GBPUSD could fall back to the swing low near the 1.2300 handle and channel bottom.

The 100 SMA is below the 200 SMA to confirm that the path of least resistance is to the downside or that the selloff is more likely to gain traction than to reverse. The 100 SMA is holding as dynamic resistance as well.

Stochastic is in the overbought zone and is starting to head south to indicate a pickup in selling pressure. The oscillator has plenty of room to move down, so price could keep following suit until sellers are exhausted.

RSI appears to be topping out without reaching the overbought zone, suggesting that sellers are eager to return.

GBPUSD popped higher this week when downbeat flash manufacturing and services PMIs from the US economy dampened hopes of a pushback in easing. Recall that FOMC officials spoke of delaying rate cuts in their testimonies last week due to stronger inflationary pressures.

The US advanced GDP reading also came in significantly weaker than expected, but the dollar had an initial bullish reaction when the price index came in higher than consensus. Still, profit-taking off the rallies was quick since traders are likely bracing for the core PCE price index.

Another upside surprise in inflation might be enough to push GBPUSD back on its downtrend, as revived hawkish bets for the Fed might mean more upside for the currency.