In the European session, GBP/USD reached the psychological level of 1.3008. From that level the pair is making a technical rebound. Early in the American session, it is trading at 1.3060 with a slightly positive bias.
Some news of a diplomatic solution to end the war in Ukraine came last week, raising global risk sentiment and undermining demand for traditional safe-haven assets, including the US dollar.
The British pound defended its psychological level of 1.3000 on Monday and found additional support from expectations that the Bank of England would raise interest rates at its next meeting on Thursday.
Market optimism will remain limited amid the risk of a further escalation in the conflict between Russia and Ukraine. Investors' eyes are on the outcome of the two-day meeting from the FOMC on Wednesday and the BoE policy decision on Thursday.
Technically, the British pound has formed a falling wedge pattern. A consolidation, break and daily close above 1.306, the zone of 3/8 Murray, could push it higher towards the top of the downtrend channel around 1.3130.
On the other hand, a sharp breakout of the downtrend channel that was formed since Feb 21 and a close above 4/8 Murray could mean a recovery of the British pound. GBP/USD could reach the 200 EMA at 1.3385 and to 6/8 Murray at 1.3427.
Since March 8, the Eagle indicator has been giving a positive signal. However, this divergence could fulfill its objective if the pound consolidates above 1.3180 in the coming days.
Our training plan for the next few hours is to buy GBP/USD above 1.3050 with targets at 1.3140. A sharp breakout of the downtrend channel could give us another opportunity to buy with targets at the 200 EMA at 1.3385.
