GBP/USD Price Analysis: Pullback near 1.3160 on Inverted H&S validation

• Pound bulls are testing the Inverted H&S formation to resume upside.
• The RSI (14) needs to overstep 60.00 for a fresh impulsive wave.
• The 200-period EMA will act as a major barricade going forward.

The GBP/USD pair has witnessed a steep fall after struggling to breach 1.3300. The cable is oscillating in a narrow range of 1.3158-1.3215 in early Tokyo and is likely to consolidate further.

On a four-hour scale, the cable has witnessed a firmer upside after an inverted head and shoulder formation, which signals a bullish reversal. Usually, a head and shoulder formation denote a sustained inventory distribution from institutional investors to retail participants. The asset has already given a breakout and is retesting the right shoulder congestion zone, which is in a range of 1.3088-1.3211.

The cable has sensed barricades near 200-period Exponential Moving Average (EMA), which is trading near 1.3285.

The Relative Strength Index (RSI) (14) is oscillating in the 40.00-60.00 range, which signals for consolidation going forward. However, a breach above 60.00 will add to the upside filters.

Should the asset overstep Thursday’s high at 1.3214 sterling bulls will send the pair towards 200-period EMA at 1.3285, followed by 50% Fibonacci retracement at 1.3322.

On the flip side, bears may dictate the price if the cable drops below March 22 low at 1.3120, which will drag the asset towards March 17 low at 1.3088. Breach of the latter will expose the cable to psychological support at 1.3000.

GBP/USD four-hour chart