GBP/USD Price Analysis: More downside seems favored below 1.2700 as hawkish BoE challenges UK outlook

• GBP/USD is gauging support near 1.2700, however, the downside seems favored due to the risk-aversion theme.
• On Thursday, the BoE surprisingly announced a fat rate hike and push interest rates to 5%.
• GBP/USD has shown a perpendicular fall after forming a Double Top chart pattern.

The GBP/USD pair has shown a vertical fall to near the round-level support of 1.2700 due to the risk-aversion theme in the Asian session. The Cable is expected to deliver more downside as the hawkish stance by global central banks is threatening the global growth outlook, which has improved the appeal for the US Dollar Index (DXY) significantly.

The US Dollar Index (DXY) has climbed above 102.60 as the Federal Reserve (Fed) chair Jerome Powell has confirmed more interest rate hikes ahead, considering the fact that achievement of 2% inflation has a long way to go.

On Thursday, the Bank of England (BoE) surprisingly announced a fat rate hike and push interest rates to 5% as May’s inflation turned out to be more persistent than expected. Investors are expecting that bigger interest rate hikes from BoE Governor Andrew Bailey will demand the economic outlook of the United Kingdom.

GBP/USD has shown a perpendicular fall after forming a Double Top chart pattern on a four-hour scale around 1.2848. The aforementioned pattern indicates that Pound bulls attempted a breakout with weak buying interest, which triggered US Dollar bulls to take charge. The Double Top chart pattern would trigger if the Cable drops below the crucial support placed at 1.2691.

The Cable has dropped below the 50-period Exponential Moving Average (EMA) at 1.2714, which indicates that the short-term trend has turned bearish.

Adding to that, the Relative Strength Index (RSI) (14) has shifted into the 40.00-60.00 range from the bullish range of 60.00-80.00. This indicates that Pound bulls are not strong anymore and a bearish momentum could initiate if the Cable drops into the bearish range of 20.00-40.00.

Bullish bias for the Cable would strengthen if it manages to climb above the fresh annual high around 1.2850.  The upside move would expose the asset to 28 September 2020 high at 1.2930 followed by psychological resistance at 1.3000.

The bullish bias could fade if Cable drops below the previous month’s high around 1.2669, which would drag the asset toward June 12 high at 1.2600. A slippage below the latter would expose the asset to June 09 low at 1.2534.

GBP/USD four-hour chart