Early in the American session, the British Pound (GBP/USD) is bouncing after reaching the support zone of the 21 SMA at around 1.2178. Currently, it is consolidating above 4/8 Murray. As it is overbought, this technical bounce is likely to be seen as a continuation of the technical correction.
The UK central bank will meet on August 4 and investors expect the central bank to continue its tightening cycle with the possibility of a higher than 0.50% increase in the interest rate. For now, it is providing some support to the British pound but in case it loses the uptrend, it is likely to fall towards the psychological level of 1.2000.
Since July 26, the eagle indicator has been giving overbought signals. Any bounce is likely to be seen as an opportunity to sell. In case of a daily close below 4/8 Murray and below the 21 SMA located at 1.2190, it will be a clear signal to sell with targets towards the 200 EMA located at 1.2120.
On the contrary, in the event that the British pound consolidates above 1.2207, it is expected to resume the bullish bias and could reach 1.2280 again and could even touch the resistance zone of 5/8 Murray at 1.2329.
The British pound will get some support at around the 200 EMA located at 1.2125 or around the bottom of the uptrend channel. This zone will be seen as an opportunity to resume the bullish cycle. From there, it could go up towards 1.2207(4/8) and up to 1.2330 (5/8).
With a daily close and a sharp break below 3/8 Murray (1.2085), the pair could resume the main bearish cycle and the price could reach 1.1962 and could even return to 1.17.
Our trading plan for the next few hours is to sell below 1.2207 (4/8 Murray) with targets at 1.2160 and 1.2085. The eagle indicator is giving a reversal signal, so it supports our bearish strategy.
