Early in the American session, the British pound is trading below the 21 SMA located at 1.3430 and below 4/8 Murray with a bearish bias.
During the European session, GBP/USD was trading above 1.3430 but was unable to consolidate above the 21 SMA and fell back below this level.
On the other hand, a technical correction can be seen from the low of 1.3357 forming a secondary bullish channel, while the dominant trend remains bearish.
The pound could consolidate between 1.3497 – 1.3366, waiting for the BoE to increase the interest rate from 0.25% to 0.50%.
In the UK, the report on the Downing Street lockdown parties is expected to be released this week, which could decide the fate of Prime Minister Boris Johnson. So, the pound could experience strong volatility.
Therefore, it will be prudent to expect strong buying on the continuation of the technical bounce only if GBP/USD consolidates above 1.3427.
A daily close above 4/8 Murray could accelerate the momentum towards the recovery to the key psychological level of 1.3500 and up to the zone of 6/8 Murray at 1.3549.
Our trading plan is to buy above 1.3427 with targets at the 200 EMA and up to 6/8 Murray at 1.3549. A break of the secondary uptrend channel could accelerate the drop to 1.3305. Then, it would be an opportunity to sell below 1.3400.
Support and Resistance Levels for January 31 - February 1, 2022
Resistance (3) 1.3495
Resistance (2) 1.3463
Resistance (1) 1.3437
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Support (1) 1,3360
Support (2) 1.3328
Support (3) 1.3293
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Scenario
Timeframe H4
Recommendation: buy above
Entry Point 1.3427
Take Profit 1.3488 (200 EMA); 1.3549 (6/8)
Stop Loss 1.3390
Murray Levels 1.3305 (2/8) 1.3366 (3/8) 1.3427 (4/8) 1.3488 (5/8)
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