Early in the American session, GBP/USD extended heavy losses when it failed to break above 1.23. The pair remains under intense selling pressure for the second day in a row.
The bearish movement accelerated at the beginning of the American session and took the pair to the 1.2155 zone. The pair may continue to fall until reaching the 61.8% Fibonacci retracement.
The US dollar (USDX) attracted buyers in reaction to Fed Chairman Jerome Powell's speech and accelerated a bullish move to the highest level since June 17 around 104.68. This, in turn, put downward pressure on the GBP/USD pair.
Powell reaffirmed expectations for more aggressive interest rate hikes and said the US economy was well-positioned to withstand tougher policy.
On the 4-hour chart, we can see the formation of a downtrend channel since June 15. In the coming hours, the British pound is expected to continue falling and manage to bounce off the bottom of the trend channel located at 1.2100 – 1.2110.
According to the chart, we can expect the GBP/USD pair to have a strong technical bounce around 1.2100, which may lead it to the zone of 2/8 Murray at 1.2207 or even to the 21 SMA at 1.2245.
Conversely, a daily close below 1.2100 could mean a strong bearish acceleration and could lead the price to the area of 1/8 Murray at 1.1962.
Our perspective is that the pound will manage to rebound above 1.21 in the next few hours and even in the next few days. If this scenario comes true, the pair could break the top of the downtrend channel and even reach the 200 EMA at 1.2386.
Our trading plan for the next few hours is to buy in case there is a technical bounce around 1.2110 with the targets at 1.2249 and 1.2309. The eagle indicator is giving a bearish signal but could find strong support at 61.8% Fibonacci.
