GBPUSD looks ready for another leg lower, as the pair formed a double top pattern on its 4-hour time frame. Price is already testing the neckline around the 1.2000-1.2050 zone, and a break lower would confirm a selloff.

If that happens, GBPUSD could slide by the same height as the chart pattern or nearly 250 pips. Note, however, that technical indicators are pointing to a continuation of the rally.

For one, the 100 SMA is above the 200 SMA to suggest that the path of least resistance is to the upside or that support is more likely to hold than to break. The 200 SMA appears to be holding as dynamic support, possibly sending GBPUSD back up to the highs around 1.2250.

Stochastic is indicating oversold conditions or exhaustion among sellers, so turning higher would mean that buyers are ready to take over. RSI has a bit more room to head south before indicating that sellers need a break, but the oscillator is closing in on the oversold region as well.

There are no major reports due from both the UK and US economies later today, so the pair might simply take cues from risk sentiment or pricing in ahead of the week’s top-tier events. Among these is the FOMC minutes, which is expected to signal a shift in policy bias.

Note, however, that this meeting took place before the release of the latest round of inflation and employment data, so traders might take the commentary with a grain of salt. If the Fed still expresses a strong inclination for tightening aggressively, the dollar might be able to see some gains.

On the other hand, indications that Fed policymakers are considering a slower pace of tightening in the coming months could underscore the view economic activity has been dampened.