GBP / USD pair is approaching a key resistance that could limit your potential gains. The area of 7/8 Murray means reversal. If in the next few hours, the British pound remains below this level, there is the probability of an immediate technical correction towards the SMA of 21 located at 1.3500.
Investors expect the Fed to act quickly against the rising inflation as it tightens its monetary policy. This could help limit any significant gains for GBP / USD and keep prices around 1.35.
According to the 4-hour chart, it is clear that the GBP / USD pair is overbought and is expected to trade between the price range of 1.3500 - 1.3550 in the next few hours.
Only a daily close below the psychological level of 1.35 and below the 21 SMA could confirm the technical correction move. That being the case, a fall could occur towards 6/8 of Murray located at 1.3427 and down to the EMA 200 located at 1.3380.
Since December 31st, the British pound has been testing the resistance of 1.3549 (7/8 Murray) that seems to be strong to prevent the pound from its further upward movement. So, the key is to trade below 7/8 Murray so that we can sell with targets at 1.3500 and 1.3427 (6/8).
The eagle indicator has broken the uptrend channel that was maintaining or giving strength to the British pound. Therefore, it is likely that below this level the pound may lose volume and volatility and there could be a drop in the coming days.
Support and Resistance Levels for January 05 - 06, 2022
Resistance (3) 1.3611
Resistance (2) 1.3591
Resistance (1) 113568
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Support (1) 1.3513
Support (2) 1.3470
Support (3) 1.3427
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Scenario
Timeframe 4-hours
Recommendation: sell
Entry Point 1.3549
Take Profit 1.3510 (21 SMA), 1.3427(6/8)
Stop Loss 1.3585
Murray Levels 1.3549 (7/8), 1.3671 (8/8)
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Alternative scenario
Recommendation: buy in case of rebound
Entry Point 1.3510
Take Profit 1.3550
Stop Loss 1.3475
Murray Levels 1.3427 (6/8) 1.3305 (5/8)
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